There are lessons and reminders in our everyday lives and interactions. Often, we can use them to help others. With this point in mind, I’d like to share an unsettling experience I recently had that might be helpful to others.
It had to do with a client that I have known and worked with for several years. Let’s call her “Dora.”
I work for the Florida branch of Capital Investment Advisors as a financial planner. During my tenure, I got to know Dora very well. She was a widow in her early 80s who had no children and no close family near her home in central Florida.
Over time, I noticed the dynamic of my conversations with Dora began to change. She seemed to start to forget things, and would ask me questions like, “Do you know me?” I would remind her she was a long-term client, and of course, I knew her. Then she would appear calm and cogent, and our conversations would proceed as usual about her finances. I began to suspect that Dora may be dealing with slight, occasional memory impairment.
Compared to other clients, Dora was especially dependent on the financial professionals she had relationships with to help with her money management. Of course, we at Capital hold ourselves to high standards of professionalism and ethics. We always work with our clients’ best interests in mind. But, not everyone does the same.
My interactions with Dora reminded me of the lesson that, while we should make financial plans for ourselves, we should also make plans that cover the chance that one day we may not be able to manage our own affairs. While Dora was still cognizant enough to direct how she wanted her money to be managed, this may not always be the case. And it’s sadly not the case with many aging adults.
So, how do we safeguard against losing our capacity, or our cognitive abilities, when it comes to decisions about our finances? There isn’t one easy answer to these questions, but I do have a handful of recommendations.
1. Work closely with a trusted advisor. In Dora’s situation, this wasn’t an issue because we had a long-standing professional relationship. I knew what her preferences and goals were when it came to investing and money management. But, for others, they may not have someone to work with that they trust.
My advice is to vet advisors carefully before you decide to work with them. Research them on the Internet, ask them questions and understand how their fee structure works. If they receive a commission for every trade they make, I would be leery. You want someone who understands your unique investing goals and who works to support those goals, and who you also will feel comfortable working with long term. Be sure you find someone who will take the time to get to know you, and who works with your best interests in mind.
2. Speak with your loved ones as they age about their financial wishes. This one is key for family members. As mom and dad age, it’s important to talk to them about their money. Of course, this is not an easy conversation to have, but it’s important. If one (or both) ever lose the capacity to manage their affairs, you will have an understanding of how they want their finances managed. Not only will you not be working in the dark, but you’ll rest easy knowing that their wishes are being honored.
3. Talk to an estate planning attorney about a Financial Power of Attorney. I have one, and most of my friends and colleagues do, no matter their age. This document is a crucial piece of any long-term plan.
What it does is appoint someone of your choosing (someone you trust implicitly) to be your “agent” under the Financial Power of Attorney (“FPOA”) if you ever cannot manage your own financial affairs. The agent is bound by a fiduciary duty to act only in your own best interests. So, an FPOA ensures that you can choose who will “step into your shoes” and manage your money if you aren’t able to.
4. Consider a care coordinator. If you find yourself in a situation like Dora’s, with no close-by family, then consider proactively seeking the help of an agency that specializes in coordinating all aspects of a person’s life in the event the individual is not able to do so on their own. There are many such agencies around the country. Just as you would with a potential financial advisor, be sure to vet the agencies. Find out how they operate, what services they outsource, and then investigate these other businesses. Try to see who would make you the most comfortable.
Planning for incapacity isn’t pleasant. We have to imagine scenarios where we hand the checkbook over to someone else to manage our affairs. But, when we do plan, we have much more autonomy and decision-making power over our financial futures. And remember, you may never need the help. But if you do, you can rest easy knowing that you’ll be in good hands.
