As trusted professionals, we are privy to more than just financial information with clients. At the heart of our approach is a commitment to caring for our clients, ensuring their well-being and satisfaction in every interaction. In having this approach, it’s essential to address the possibility of diminished capacity, a topic that requires delicate consideration and proactive planning.
In today’s rapidly ageing society, the issue of diminished capacity is becoming increasingly prevalent and presents unique challenges and concerns both for individuals and financial institutions. By definition, an individual with diminished capacity has impaired mental state or condition caused by disease, trauma, or intoxication. When individuals show signs of diminished capacity, they are at a heightened risk of making poor financial decisions, falling victim to fraud, cyber attacks, mismanaging personal assets, or elder abuse. Let’s dive in to this further.
5 Signs of Diminished Capacity
Diminished capacity may be the result of the onset of dementia, Alzheimer’s disease, dipolar or simply age-related memory changes. Signs of diminished capacity may include:
- Difficulty in Making Decisions: Struggling with choices that previously would have been easy or taking significantly longer to make decisions about everyday tasks or providing uncharacteristic poor judgment.
- Memory Loss: Not just misplacing keys, but forgetting appointments, names of close friends or family, duplicating requests, or the details of recent events significantly more often.
- Changes in Mood or Behavior: Exhibiting drastic mood swings, unwarranted aggression, or noticeable changes in personality without a clear reason.
- Confusion and Disorientation: Experiencing confusion or disorientation in familiar settings, struggling to remember the date, or performing tasks that were once routine.
- Withdrawal from Social Activities: A noticeable retreat from social engagements, hobbies, or activities that were once enjoyed, potentially indicative of struggling with cognitive functions.
Recognizing and understanding the top signs of diminished capacity early on is essential. These symptoms not only affect individuals’ daily lives but also pose significant risks to their financial health and security. As the financial industry grapples with these challenges, the development and implementation of protective measures for clients displaying signs of diminished capacity have become imperative. Such measures range from establishing trusted contact agreements to enhancing staff training on recognizing these symptoms, all aimed at safeguarding vulnerable individuals from potential financial missteps or exploitation.
Combatting the Issue
As clients reach a certain age, the effects of diminished capacity may begin to impact financial capacity. Financial capacity can be defined as the ability to independently manage one’s financial affairs in a manner consistent with personal self-interest. BentOak Capital recognizes its responsibility to collaborate with clients and any necessary family, friends, or other qualified professionals the client has named in order to move forward if the client’s financial capacity has been comprised. In order to address these circumstances, BentOak Capital:
- advises all clients create a living will (durable/financial power of attorney) specifically directed at their financial interest should their financial capacity be at all compromised,
- asks all clients to provide a trusted contact form; this is the name and contact information of at least a family member and/or a client “advocate,” if a non-relative, to contact in the event we suspect any irregular or suspicious activities that may be related to diminished capacity,
- requests signed permission (authorization release of information form) from clients to discuss any suspicious activity in client’s accounts with approved third party(ies) if we suspect diminished capacity. This includes unusual or abrupt changes to beneficiaries, power or attorney, or trustees,
- has procedures in place so that if a BentOak Capital team member suspects a client may be suffering from diminished capacity, they shall immediately notify the appropriate compliance team members to help document and create a remedy to the situation,
- and empower others such as family members, friends, and other appropriate professionals to report any signs of diminished capacity promptly.
In light of the complexities associated with diminished capacity, financial institutions like BentOak Capital play a pivotal role in identifying vulnerable clients and implementing strategies to protect their interests. By advising clients to establish and maintain updated living wills, trusted contact forms and information, we fortify our commitment to safeguarding clients and their assets. Our proactive approach in training staff, as well as empowering families and professionals to report concerns, reflects our dedication to the well-being of BentOak Capital Clients. If you know anyone that may be showing signs of diminished capacity or have additional questions, please contact BentOak Capital and we would be happy to discuss.
Please remember to contact BentOak Capital (“BentOak”), in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that BentOak to effect any specific transactions for your account. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.bentoakcapital.com.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Securities offered through LPL Financial, Member: FINRA/SIPC. Investment advice offered through BentOak Capital, a registered investment advisor and separate entity from LPL Financial.
