My mother suffered from a rare form of dementia called primary progressive aphasia prior to her death. Before her diagnosis, she always seemed to have the right answers. Her neurologist once told us that the fluid intelligence used in problem solving peaks around age 20, and I remember being disappointed that even I am already 20 years past my prime.
Even though it impacts people differently, cognitive impairment is a fact of life as we age. This is one of the reasons the Canadian Securities Administrators (CSA) wants advisors to take reasonable steps to obtain contact information for a trusted contact person (TCP) for clients. Unlike a Power of Attorney, who may take over financial decisions for someone who has been deemed to have lost capacity to make those decisions, a TCP is a precautionary role.
“Due to the nature of their client relationships, [advisors] are in a position to be among the first to recognize signs of diminished mental capacity or financial exploitation of older or vulnerable clients,” according to Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. “The proposed amendments increase investor protection and provide certainty and clarity to firms on how to act in these situations, while preserving client autonomy.”
Financial literacy is an important life skill at all ages and stages. Even if you’re still early in your journey, consider that good or bad financial choices you make as a young person can compound as you age. So, yes, financial literacy is critical early on. However, there are many reasons that later-life financial literacy is important for seniors, their families and their advisors.
TCPs are a good initiative from regulators for the financial industry. But what about the unwritten rules of elder financial literacy for others, like families?
One thing that always worries me is the risk of having one spouse who makes most or all the financial decisions. It causes the uninvolved spouse to be vulnerable should they someday be tasked with taking over the family finances. It is one reason that seniors, their family and their advisors should try to involve both spouses in money discussions.
After something has happened to a key financial decision-maker, some seniors get overwhelmed with the basics of trying to figure out how to do things as simple as paying the monthly bills. I have seen this firsthand and the thing that makes it even harder is that, whether the decision-making spouse becomes disabled or has died, their partner is thrust into the decision-making role at a time when they are also mourning a loss—figuratively or literally.
Other unprepared spouses end up with an investment portfolio that is not in line with their risk tolerance or their understanding of investing. Both factors could put them at risk of selling stock at a low point in the markets, or having a knee-jerk reaction.