Fidelity has introduced a program to help advisors protect aging clients from fraudsters, while also highlighting the importance of being able to spot the early signs of cognitive impairment.

The term “wealth management” has evolved significantly over the past decade. The rise in popularity of “goals-based” financial planning, for example, has contributed to the notion that the role of the financial advisor is no longer solely focused on clients' return on their investments. The array of wealth management services in the industry is getting longer and longer, and therefore the skills required of advisors is becoming more diverse.

Investor demographics are also changing and the sector is having to deal with emerging threats at both the client and institutional level. One particular issue that has bubbled up in recent months is highlighted in new research by Fidelity: that three-quarters of financial advisors are working with clients with diminished mental capacity, while one in five advisors has encountered financial abuse among their aging clients.

According to a new report by Cerulli Associates launched this week, aging client bases will create challenges for advisors, as 57 per cent of their clients are above the age of 60 (while the summary did not specifically cite cognitive impairment, it is fair to anticipate that this would likely be among the list of related issues.)

“With more Americans living longer, advisors and their firms are increasingly confronted with this issue,” Fidelity said. “It’s becoming even more critical for advisors to recognize the signs of diminished capacity and implement plans to mitigate the financial risks for their clients and their firms.” The firm highlighted that, according to the Alzheimer’s Association, the number of people aged 65 and older with Alzheimer’s disease may nearly triple from 5.1 million to some 13.8 million by 2050.

In response, Fidelity Clearing & Custody has launched a program designed to help firms manage the financial issues associated with aging clients by teaming up with EverSafe, which provides a daily monitoring service that scans financial accounts and credit reports for suspicious activity and identity theft.

“Although no two situations are alike, advisors should be aware of indicators that might signal diminished capacity in their aging clients, including confusion and memory loss,” said David Canter, executive vice president of practice management and consulting at Fidelity Clearing & Custody. “Our goal with this offering is to help advisors implement policies and procedures to identify changes in their client’s behavior, monitor their financial accounts and mitigate the potential for financial abuse.”

Advisors should be responsive to any changes in a client’s behavior that appear out of the norm, Fidelity said. This may include: confusion with simple concepts, repeating instructions or questions, disorientation of time and place, and difficulty performing familiar tasks. “For example, if a client arrives several hours late or goes to the wrong office for a meeting that was previously confirmed, or if a client is unable to review or understand standard reports provided.” The costs of missing these signs are high, it added: according to some estimates, seniors lose more than $36 billion each year to elder financial abuse.

“I founded EverSafe after my mother was exploited by telemarketers and sold inappropriate products,” said Howard Tischler, founder and chief executive of EverSafe. “After intervening on behalf of my mother, I quickly learned how widespread the problem of elder fraud is, and decided to do something about it. This service is another tool that advisors can use to help their clients preserve and pass on their wealth. It offers the ability to detect potential financial abuse when it starts, not after the accounts are empty and there’s little chance of recovery. That’s something my family learned too late.”

In addition to reviewing their clients’ accounts, there are several steps advisors can consider to help protect aging clients, Fidelity said, including: discussing the subject of dementia with older clients; reaching out frequently to older clients; developing stronger relationships with a client's family; documenting and regularly reviewing an investment policy statement; and helping older clients stay organized financially.

While the topic of health in a wealth management framework used to be centered primarily on issues affecting older individuals - with Fidelity's move being highly reflective of this - this is changing, Paul Cummings of Abbot Downing said at the most recent Family Wealth Report Summit. “People are now starting to view it as something that really warrants disciplined management and advocacy.”

The issue was also flagged up by Glen Johnson, managing director at Mirador Family Wealth Advisors, during the CEO panel at Family Office Exchange’s 2015 Wealth Advisor Forum. Understanding the difference between an age and health issue is going to be crucial in 2015 and beyond, Johnson said. He added that there is a need for more industry training on the early signs of cognitive impairment, for example, so that advisors can handle any unexpected situations delicately and in an informed manner.