All About Estates

Older clients and capacity – what financial advisors should know

Last month I had the pleasure of presenting- along with fellow blogger Dr. Ken Shulman – at a Scotiabank conference. Our audience was comprised, for the most part, of ScotiaMcLeod and Private Investor Counsel financial advisors. Dr. Shulman provided a clinical perspective on capacity/incapacity and I focused on the importance to advisors and their clients of planning for potential future incapacity.

Dr. Shulman set the stage by reviewing some, in my view “scary”, statistics.  We were reminded that the Canadian population – and the advisors’ client base – is rapidly ageing and that the prevalence of Alzheimer’s Disease and related dementias increases exponentially with age.  Dr. Shulman went on to discuss how dementia is diagnosed and deficiencies in the widely-used mini-mental state exam.  I was fascinated to learn just how effective the, seemingly simply, “clock-drawing” test is at identifying cognitive impairment, including the crucial component of decreased executive functioning.  Every aspect of the test, from the placement and spacing of the numbers to the drawing of the hands and the level of cognition needed to appreciate that when asked to draw 11:10, the “ten” is actually represented by a two, can be revealing.  Here is Dr. Shulman’s list of the cognitive functions involved in clock drawing:

  • comprehension
  • abstract thinking
  • planning
  • visual memory
  • visuo-spatial abilities
  • motivation
  • concentration
  • inhibition of stimulus pull to 10

Dr. Shulman did a great job of explaining what capacity means or requires in the case of an investment management client.  He explained that capacity is both task- and situation-specific.  He noted that the more complex a situation (the more complex a client’s portfolio/financial assets) the higher the level of cognition required to be considered capable.

Dr. Shulman’s presentation included a useful list of “red flags” for advisors to be aware of.  These indicators include:

  • great age
  • dramatic change from prior expressed views
  • inconsistent or “unnatural” provisions
  • concerns from family (Dr. Shulman noted that when a family member is concerned there may be a problem, they are almost always correct)

and, we were reminded not to be fooled by social graces, they are often the last thing to go.

Based on audience reaction and participation and feedback received, Dr. Shulman’s (most entertaining and often humorous) presentation was very well received.  I am hopeful the presentation helped focus advisors’ attention on this important and timely issue and will encourage advisors to work with their clients to ensure they have a viable plan in place.

Thanks for reading.



About Elaine Blades