It’s a sad fact that nobody wants to face.
With the aging population, the incidences of cognitive decline are increasing. By age 70, according to the National Institutes of Health, roughly two-thirds of Americans are likely to experience a degree of intellectual incapacity.
For financial advisors, the possibility of losing cognitive capabilities represents a huge risk. Data analytics giant J.D. Power estimates that the average financial advisor in the U.S. is 56 years old. But most firms are unprepared for the potential mental deterioration of their key professionals.
What can be done to address this problem?
Make a Plan
“If you are talking to your clients about their potential cognitive decline, you should also be talking about your own,” said Erin Wood, a senior vice president at Carson Group in Omaha, Neb. “Telling clients about your established plans for your own cognitive decline not only shows the clients how important it is, but gives them confidence to know they will be taken care of.”
To Wood, preparing for advisors’ potential loss of capacity should be part of routine succession planning. “Firms typically have not spent enough time talking with advisors about their succession plan,” she stressed. “Instead, most events are centered around growing your practice and your skills. But with an aging population, it’s more and more important that firms help advisors find the next generation of advisors who are willing and able to rise up and lead.”
At her firm, she said, there are established procedures for helping both clients and advisors cope with a host of age-related illnesses. “Additional advisors and operational support [are] available to assist with adjustments to the next stage,” she said.
Start Early
Brett Bernstein, CEO of XML Financial Group in Bethesda, Md., might agree. “Firms need to think about their aging advisors just as we do with aging clients,” he said.
How exactly should firms prepare for cognitive decline in their advisors? “Start early,” he said. “If you are early in your planning, it allows you to avoid any potential issues [and] integrate a few younger advisors for a smooth and seamless transition.”
To Bernstein, advisors are never too young to start thinking about the issue. But whenever it’s addressed, be sure to include the aging advisors themselves. “Find a solution that’s suitable for everyone,” he said. “Ask questions of the aging advisors, no matter how uncomfortable the questions may be. This way, everyone is on the same page.”
Precisely what the solution entails “depends on the size and culture of the firm,” he said. “It’s a case-by-case situation.” However, involving anyone who is close to the advisor, as well as superiors and representatives from human resources, legal, and compliance departments, can facilitate these conversations, he noted.
“But if you feel the advisor, clients, or firm are at risk,” he added, “then you need to work for a solution swiftly.”
