Tom Murphy never intended for his Dallas-based wealth management firm to specialize in dealing with clients who have cognitive impairments. The West Point graduate and former military intelligence officer co-founded Murphy & Sylvest Wealth Management in 1987 and spent more than a decade doing the typical business of divvying up investments between bonds and stocks and cash and whatnot as clients headed into retirement.
But after Murphy’s mother died from Alzheimer’s in 2001, something changed. “The experience of figuring out how to take care of my mom was my introduction to Alzheimer’s,” Murphy says, “which then led to an understanding of what we call ‘cognitive impairments.’ ”
Those impairments might include mental declines related to Alzheimer’s or dementia or strokes or even what some just call “senility.” Many financial planners shy away from clients with those conditions—preferring instead to simply transfer control of their accounts to a guardian.
But after his mother’s illness, Murphy was inspired to go a different route. He says he wanted to help those with cognitive impairments keep control of their finances for as long as they can. Over the course of two decades, Murphy’s firm has developed its own procedures for both spotting cognitive impairments in clients and for continuing to work with them.
“This was not something I actively pursued as an area of specialization,” Murphy says. “Because, frankly, there really is no such specialty as ‘cognitive impairment.’ ”
Maybe there ought to be. In a graying America, financial planners will have an increasing number of clients with cognitive impairments. Already, the Alzheimer’s Association estimates that 6.7 million Americans age 65 and up—about 14 percent of the total population of that age—have Alzheimer’s dementia. As the population ages by 2050, the Alzheimer’s Association projects there will be more than 13 million people with Alzheimer’s dementia. In Texas alone, the association expects 22.5 percent more Alzheimer’s dementia cases in 2025 than there were in 2020.
That’s not because older people are getting sicker than in previous generations. It’s because there are an increasing number of older Americans. The U.S. Census Bureau projects that by 2035, there will be more Americans age 65 and older—the group most affected by dementia as well as other forms of cognitive impairments—than children under age 18. As that demographic shift arrives, it’s worth thinking about what you can do to spot the potential signs of cognitive impairment in yourself, your spouse, or other family members; what should be done financially if cognitive problems do emerge; and what you should expect from a financial adviser.
1. Look for warning signs and beware of denial.
Early signs of cognitive problems are sometimes subtle enough that family members might not realize anything is out of the ordinary. Murphy has seen that happen in his personal life. His mother-in-law, like his mother, had Alzheimer’s. But the condition went unnoticed for a while, even after the former mathematician and excellent home cook mistakenly swapped sugar for salt in a couple recipes.
But while those kinds of cues can be missed, trouble handling finances is often more noticeable—at least to financial professionals. Included in the Alzheimer’s Association’s warning signs of disease are several that specifically relate to managing finances, which could include an inability to pay bills properly and a sudden desire to significantly deviate from long-established financial plans.
“I don’t want to say we diagnose dementia in our clients,” Murphy says. “But we are among the first people to notice that they are acting differently from the way they have acted before. The pattern that we see is someone who has never bounced a check, bounces a check. Or they’ll make an uncharacteristic financial request, like asking to move a large part of their investments into gold. Those requests are often a sure sign that something has changed.”
Still, clients don’t always respond well to Murphy’s concerns. Some simply deny that they may have a problem. “When we know that somebody has an issue, they often deny it, and they refuse to let anybody do anything about it,” Murphy says.
About 1 in 20 adults over the age of 60 will be affected by financial abuse—and most will be victimized by their own family.
When someone denies having a cognitive problem or simply fails to recognize a problem, troubles can mount quickly. Murphy says he had one client who was checking out at the grocery store when she discovered her credit cards had been frozen. The client’s husband handled the family finances and had stopped paying bills. He was later diagnosed with dementia.
“That’s how it goes,” Murphy says. “The very first indication of a cognitive impairment often comes when the impairment has already caused a bloody damn disaster of a problem.”
Those disasters could be averted by basic cognitive tests, such as the 11-question St. Louis University Mental Status Exam, which can reveal signs of dementia early enough to allow people to prepare their finances for a difficult future.
2. Get a “trusted contacts” list together.
Dementia and Alzheimer’s have no cure. The conditions get worse over time. The typical life expectancy of a person with Alzheimer’s is just four to eight years after diagnosis. And the Alzheimer’s Association says the disease kills more seniors than breast cancer and prostate cancer combined. That dire outcome means financial planners will often have to turn to what’s called a “trusted individual”—typically a family member who has been granted financial power of attorney—to take over the financial plans.
Murphy’s firm asks clients both to designate a trusted person who has financial power of attorney and to give the firm permission to contact that person if unusual circumstances arise. “If you come to us and say, ‘I’m going to sell my house and move to Botswana,’ ” Murphy says, “then we will already have your written permission in place to contact whoever the trusted individual is and to take instructions from that person if we feel it is necessary.”
Some wealth management firms see handing control to trusted contacts as the best way to avoid liabilities that can come with attempting to manage the finances of a person with cognitive impairments. Instead of continuing to work with clients after they’re diagnosed with a disease like dementia, the wealth management firms may immediately freeze accounts and ask that they be taken over by someone with financial power of attorney or by a guardian. Murphy & Sylvest takes a different approach.
“If you’re early in the dementia process, you’re probably fine at least five out of seven days in the week,” Murphy says. “So the worst thing we can do is force somebody to go down and get a guardianship. Because with a guardianship, the client can no longer sign a check or a contract or do anything in their own name. That’s not the same as a power of attorney. If you have given someone power of attorney, you can still make all your own decisions until you’re no longer capable of doing so.”
3. Expect financial planners to change course and to use new laws to help protect you from fraud.
According to a study on financial planning and cognitive impairment that was published in the Journal of the American Medical Association Network in 2022, financial planners should adjust the kinds of investments their clients are making once a disease like dementia has been diagnosed. The study suggested moving clients into lower-risk investments that are simple to manage, such as annuities.
Researchers at the MIT AgeLab also found that financial planners need to alter the way they communicate with clients who have cognitive impairments. The MIT researchers recommended that planners detail every communication and share the outcomes with clients who are at risk of forgetting or being confused by what was discussed.
That’s the approach Murphy & Sylvest takes. The firm always sends multiple advisers to meet with clients who have or may have cognitive impairments, and, as Murphy puts it, “We document the hell out of everything.”
A high level of documentation can also help head off financial abuse of vulnerable seniors. Elder Americans are at increasing risk of becoming victims of online scams—which Murphy calls “the Nigerian prince kind of thing”—as well as financial exploitation from family members. A study by Weill Cornell Medical College found that about 1 in 20 adults over the age of 60 will be affected by financial abuse—and most will be victimized by their own family.
To counter those risks, lawmakers have moved to help financial planners better spot and stop opportunities for fraud. In 2017, the Financial Industry Regulatory Authority (FINRA), a not-for-profit, government-authorized entity that oversees financial planners and other investment professionals, adopted rules that require advisers to undergo training in how to spot cognitive impairments in their clients. And, in 2018, Congress passed the Senior Safe Act, a bill that gives financial planners and others broad leeway to report people who they suspect of senior financial fraud. Then, in 2022, the FINRA broadened its rules allowing planners to freeze client accounts that may have been compromised.
Preventing fraud is one key reason why Murphy prefers to keep working with cognitively impaired clients as long as they’re able to make good decisions. “Sometimes kids may be out to just steal the money,” Murphy says. “But sometimes they have good intentions. Sometimes a kid may think, ‘Let’s put all Mom’s money into a brokerage account and put that account into my name, because then Mom will qualify for Medicaid, and we won’t have to spend so much taking care of her. That will preserve the inheritance for us kids.’ But then they don’t leave the money in the brokerage account. They spend it.”
This story originally appeared in the November issue of D Magazine with the headline, “Mind Over Money.” Write to [email protected].
