25% or more of a typical wealth management firm’s assets under management are at risk – directly as a result of diminished capacity.
BELMONT, Mass. (PRWEB) April 13, 2021
Three financial services and technology experts – all with extensive professional and personal experience devising strategies to protect families and improve financial decision-making – have released a whitepaper that provides a framework for more effective client engagement, risk mitigation, and protection around diminished capacity.
The whitepaper, “Cognitive Overload: The Coming Surge In Diminished Capacity Cases And What Wealth Management Firms Can Do To Protect Their Clients And Themselves”, summarizes the current demographic realities, the nature of the risks to financial services firms, the regulatory environment, and the opportunities for firms seeking to better protect their clients - and themselves.
Older adults control the vast majority of wealth in the US, with an estimated 83% of all assets owned by individuals over the age of 50. (Source: AARP, “The Longevity Economy”, 2016) As the US population ages over the next decade, the concentration of wealth in the hands of older adults is likely to accelerate.
The aging of the US population presents both challenges and opportunities for the financial services industry. Trillions of dollars will be transferred to heirs over the next 20 years, presenting significant opportunities for asset accumulation and consolidation. (Source: Cerulli Associates, “U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2018: Shifting Demographics of Private Wealth”, 2018) On the other hand, the health-related hazards that inevitably accompany an aging client base present substantial challenges.
Of these health-related risks, none is as vexing, or potentially harmful, as diminished decision-making capacity. About 13% of adults over 65 are living with Alzheimer’s or another type of dementia, and an estimated additional 15-20% suffer from at least mild cognitive impairment. (Source: AARP, “Alzheimer’s Association Facts & Figures”, 2018) This suggests that upwards of 25% or more of the average wealth management firm’s clients are at risk for poor financial decision-making and/or exploitation. This further implies that 25% or more of a typical firm’s assets under management are at risk – directly as a result of diminished capacity.
The whitepaper includes:
- The Facts: the critical data points and trends that characterize the demographic and the medical realities of an aging population
- The Risks: a summary of the six specific diminished capacity-related risks facing advisory firms
- The Guiding Principles: a review of regulatory actions and recommendations to date, including perspectives from the CFPB, FINRA, and NASAA
- The Path Forward: a comprehensive set of specific suggestions for firms seeking to better protect clients, their families, and themselves. This includes recommendations for more effective professional training, better utilization of technology, and more successful collaboration with physical, mental, and behavioral health specialists.
The whitepaper will be introduced at the American Society for Aging’s 2021 “On Aging” conference and is supported by the Alliance for Lifetime Income (https://www.protectedincome.org/). The whitepaper is available at the Alliance for Lifetime Income’s virtual booth at the conference or at https://info.whealthcareplan.com/diminished-capacity-whitepaper.
Chris Heye, PhD, is the CEO and Founder of Whealthcare Solutions, Inc. and Whealthcare Planning LLC. He is a proven entrepreneur with extensive experience starting and growing technology companies. After confronting dementia in his own family and witnessing elder financial abuse in friends, he decided not enough was being done to protect older adults. He helped design and manage a path-breaking clinical study at the Massachusetts General Hospital investigating the behavioral and cognitive underpinnings of sound financial decision-making. The study results form the basis of an innovative financial wellness solution - Whealthcare Planning.
Dr Heye has published numerous journal articles on financial technology, financial wellness, investment, and simulation modeling. He received his BA from Wesleyan University and PhD from MIT.
Liz Loewy, J.D, is co-founder and COO of EverSafe, a technology service that monitors the financial health of older adults and families for fraud, identity theft, and age-related issues. Liz was formerly a prosecutor in the New York County District Attorney’s Office and assisted in the creation of its first Elder Abuse Unit - serving as its chief for 18 years. Liz currently serves as EverSafe’s subject matter expert on fraud and as liaison to partners in financial services, compliance, law, government agencies, and health and aging organizations. She participated in the first National Policy Summit on Elder Abuse in Washington, DC in 2001 and presented at the most recent White House Conference on Aging in July of 2015. Today, Liz serves on the boards of HelpAge USA and the Financial Exploitation Advisory Board of the National Adult Protective Services Association. She has authored a number of articles on elder fraud including a book entitled “Financial Exploitation of the Elderly: Legal Issues, Prevention, Prosecution, Social Service Advocacy.”
Katharine L. Wade is an insurance executive with 25+ years of experience. In her 20+ year career with a Fortune 100 global insurer, she oversaw federal and state government affairs, public policy and compliance for health, group life and disability businesses. She spent nearly four years as Commissioner of the Connecticut Insurance Department, the lead regulator in one of the nation’s top insurance markets. Wade presently advises start-ups, insurers and investors at Dunraven Strategies and partners with The Execution Project.
Ms. Wade has extensive knowledge of the business of insurance, including advancing sound growth and development opportunities and a track record of facilitating government recognition of new business strategies. A thought leader on regulatory policy, she was selected to chair two of the six committees of the National Association of Insurance Commissioners and to serve on the US Treasury Federal Advisory Committee on Insurance. She represented the US and the state insurance regulatory system in international standard setting and in testimony before Congress.