Despite thorough financial planning, unforeseen circumstances like cognitive decline can severely impact your and your advisor’s ability to manage your assets effectively and can lead to a loss of wealth. Cognitive decline, whether it be from aging or illness, threatens your capacity to make sound financial decisions, which is why having a plan in place with your advisor is critical. The sooner you discuss this with your financial advisor and the people you inherently trust – and build scaffolding around the scenario of cognitive decline – the better.

Plan now, not later

Early and open communication with your advisor is crucial. Discuss the potential for cognitive decline at the outset of the relationship, take the initiative to put a plan in place and communicate about it regularly. Consider it like an insurance policy. You hope you’ll never need it, but if cognitive decline presents itself, you have a strategy in place.

Some things to consider before it’s too late:

• Talk with your advisor. Have a frank discussion on cognitive decline triggers and steps to take, including authorizing another decision-maker, should there be red flags. Evaluate worst-case scenarios, such as an uncharacteristic request to withdraw a large sum of money, establish protocols and revisit this plan regularly.
• Understand what your advisor can and cannot do. Your advisor can only speak to you or your joint account holder about your investment account. They are not authorized to speak about it with your beneficiaries, children or spouse if they are not an account holder. If you demonstrate cognitive decline, those closest to you likely witness it first, but your advisor cannot consult with them about your assets. You may want to consider some options that empower your advisor to ensure your assets are protected such as identifying and naming a “trusted contact” person.   
• Create a power of attorney. If you have an individual account and you are the only account holder listed, you may want to consider a power of attorney (POA). Identify a trustworthy individual who can make financial decisions on your behalf or discuss them with your advisor if there are any concerns. A durable POA will remain valid even if you are incapacitated. If you are apprehensive about granting a broad POA, you may want to consider a limited POA that restricts the agent to specific tasks such as control over your finances.  
• Make connections. Your advisors should meet with your beneficiaries at least once a year. Consider bringing them to a meeting and including them in financial discussions. Everyone should be familiar with the relationship, approach and financial goals before facing unexpected critical decisions.
• Consider an irrevocable trust. This approach allows you to create a trust to hold assets, designate a third party as the trustee and name beneficiaries. If you become incapacitated, an irrevocable trust will allow your trustee to make decisions about your assets without court intervention.
• Authorizing advisor discretion. Granting your advisor discretion over your portfolio can be important as you age. Not only can your advisor make quick investment decisions without needing to consult you about each transaction, but they can also carry out the financial wishes you established before you experienced cognitive decline. This arrangement is ideally executed and delivered by an advisor who is a fiduciary, meaning they are legally and ethically required to act in your best interest. This can offer peace of mind.
• Put it in writing. Conversations are important, but a notarized, detailed document is also necessary. Share it with your advisor and beneficiaries. 

Planning for the possibility of cognitive decline is not just wise, it is critical for protecting your assets. Be proactive. Working closely with a trusted financial advisor and taking steps to prepare will not only help you navigate the challenges of cognitive decline but also give you a level of comfort.

Learn more about protecting your assets and how to approach this conversation with a financial advisor. Schedule a meeting and we’ll guide you through the process.