Spot the signs of incapacity

Something has changed.

You could tell almost from the moment your client walked through the door for your annual meeting to review her portfolio. It’s hard to put a finger on it, but she doesn’t look quite as stylish as she usually does: her hair is mussed, and her blouse — normally she’s an impeccable dresser — is stained. She’s as happy as ever to talk about her grandchildren and the weather, but when it comes to discussing the returns on her portfolio, she becomes a bit withdrawn. You mention an unusually large cash withdrawal from her chequing account: What was that for?

“I withdrew $2,000?” she responds. “My son must have asked me to.”

Financial, legal, investment and insurance advisors are all front-line workers when it comes to planning for, identifying and responding to diminished capacity in their often elderly clients, says Holly LeVaillant, an estate and civil litigator with Mills & Mills LLP in Toronto who specializes in issues that affect the elderly, including capacity, testamentary capacity, will challenges and elder abuse.

Because advisors tend to see clients at regular intervals and often have long-term relationships with them, they are in a good position to spot changes that might signal mental decline — as well as signs of potential abuses or mismanagement of their funds.

As well, a client who may be struggling with memory loss or confusion is often likely to confide in his advisor, says Jill Sing, a Victoria-based CPA, CA, CFA, CFP, and TEP, who acts as a chief financial officer for a handful of high-net-worth families. She’s often called in when family members have trouble making financial decisions. “Much like they will with a doctor, clients will often say things to an advisor that they might not say elsewhere. A client will say, ‘Well, I had a scare,’ or admit that things are shifting or they need help. And that gives me the opportunity to find people to support them.”

Some mental decline can be treated or reversed

If you suspect that a client is having some trouble with memory or understanding, a good first step is to suggest a visit to her family physician, says Dr. Arlin Pachet, a Calgary-based neuropsychologist who performs mental capacity assessments to see whether a person is capable of managing property and finances. Many reversible conditions—including delirium, depression, reactions to or withdrawal from certain drugs, thyroid disease or anemia—can cause mental decline. With proper treatment, cognitive function can be improved or possibly restored.

And while there’s never a great time to be diagnosed with an irreversible condition like Alzheimer’s, senility or dementia, the absolute best time to plan for that kind of diagnosis is before a client shows any debilitating symptoms.

Plan for incapacity before it strikes

“Planning ahead for your client’s [potential] mental incapacity is critical,” says LeVaillant. “It makes life easier for both you and your client and you can avoid potential liabilities for yourself and a lot of headaches for your client.”

For Sing, the planning process begins the moment a client signs the engagement letter to work with her.

“When I sign on a family member, I will ask them for the names of one or two other family members and advisors, like a lawyer, that I have permission to speak to in the event that an issue arises. And I will include those names in my engagement letter with a clause that says something to the effect that I have permission to contact them as it relates to our planning.”

That practice, says Sing, ensures that she can talk to a trusted family members without violating a client’s privacy. Ideally, get a witness to that agreement. If a client has not created a will and named an executor, or named attorneys for power of financial and personal care, Sing sets out to have those tasks completed within 90 days. And then, says LeVaillant, talk to your client (and document these conversations) at regular intervals about how they’d like their affairs to be handled in the event that they do become mentally incapable.

With these kinds of plans in place, and with a clear understanding of a client’s wishes, acting in the best interest of the client with diminished capacity can be relatively straightforward. A client doesn’t have to be declared legally incapacitated — an intensive process with significant implications for her rights and freedoms, notes Pachet — for advisors and attorneys to help her make decisions and manage her finances.

What if you suspect abuse?

If an advisor suspects unscrupulous or unsavoury behaviour by an attorney or another person influencing a client, it’s important to document those concerns, says LeVaillant, including a client’s statements and demeanor, as well as records of financial and portfolio transactions or changes. It may be worth discussing the matter with the trusted family members or advisors whom you have permission to contact. A next step would include putting a call into your legal department, who may decide to put a freeze on the account. If Pachet suspects financial abuse, he will notify the provincial Office of the Public Guardian and Trustee.

Sing recalls one family where it was determined that all five of an elderly client’s children were taking financial advantage of their mother, who lacked the capacity to know it. In that case, she says, a trust company was eventually assigned to take over the mother’s financial affairs.

“Nobody plans to lose their mental capacity, but unfortunately it happens to many people, and not just the elderly,” says LeVaillant, who serves as a director on the Board of the Advocacy Centre for the Elderly. “And so planning for that should be a key part of your financial plan, at any age.”