This is a major financial worry that baby boomers aren't prepared for

Decaying cognitive abilities are becoming a financial problem.

  • By Anora M. Gaudiano,
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The industry is not prepared to deal with the wave of aging clients and challenges that come with old age such as cognitive decay or dementia, said Coventry Edwards-Pitt, chief wealth adviser officer at Ballentine Partners and the author of "Raised Healthy, Wealthy & Wise."

Ballentine Partners is a firm based in Boston that specializes in providing investment and financial management advice to wealthy families and entrepreneurs.

"As fiduciaries we are supposed to look after our client's best interests. But as an industry we don't even have uniform rules when it comes to dealing with clients who are suffering from dementia," Edwards-Pitt said.

"If we suspect our elderly client is being taken advantage of, there is very little we can do. The industry does not have sensible rules that would help us do what's right by our client," she said.

Edwards-Pitt's first brush with the problem came from an experience with one of her longstanding clients.

"I received a number of withdrawal requests that were becoming larger and larger with checks made out to "friends." That was a definite red flag. But under current regulations, we had no right to inform the client's adult children, despite the fact that we knew them well. Our only avenue was to report the abuse to a state agency that deals with protecting the elderly," said Edwards-Pitt.

Standards of Professional Conduct by the Certified Financial Planner Board, a nonprofit organization that sets and enforces standards and rules for financial advisers, don't directly address the topic of cognitive decay in aging clients.

Currently, such problems are only addressed through regulations. But these rules don't help until something bad happens, in which case it becomes either too late or creates more problems than it solves, according to Carolyn McClanahan, a financial planner and a former physician.

"When an adviser suspects abuse, often by family members, the only thing they can do in such cases is to report it to adult protective services, which can freeze accounts and start an investigation," McClanahan said.

McClanahan, who has been working as an adviser for 15 years, already has seen a trend of cognitive decay in clients.

There are 47 million people who are over the age of 70, according to Pew Research. Meanwhile, there are about 74 million baby boomers, aged between 52 and 70 years.

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