The FCA have stated that firms should ‘understand the characteristics of vulnerability that exist in their target market and customer base’ but this can be a very broad topic. Vulnerability isn’t confined to one particular age group but the regulator has pointed out that people in decumulation have a higher likelihood of vulnerability than others.

As people age, different types of vulnerability may present themselves, so it’s worth thinking about how to identify them and what impacts they may have. In fact, we've put a Vulnerability in retirement guide together with Comentis outlining some of the characteristics that might come to the fore.

“As cognitive decline becomes more apparent, addressing mental capacity in financial planning becomes crucial. Rather than waiting for a formal diagnosis of dementia, it's essential to integrate considerations of mental capacity early on - as soon as signs of functional difficulty, such as trouble understanding or retaining important information, are observed. This is a safeguard for both the client and the advisor to ensure appropriate legal and ethical practice.”

Beth Yolland-Jones,Clinical Expert at Comentis

It's impossible to define the number of vulnerable situations that might occur in later life, but amongst the most common relate to the ageing brain and how we process information. Some people may experience the impact of normal cognitive ageing, whilst others may be living with more severe conditions like mild cognitive impairment (MCI) or dementia. It’s really important for financial planners to have an understanding of the challenges these cognitive states might present so you can adapt your approach and provide the right advice and support.

Although every client is different let’s broadly consider these areas, before looking at the sorts of steps you could take to respond and adapt your service.

Normal cognitive ageing

Normal cognitive ageing refers to the gradual decline in cognitive abilities which happens as part of the natural ageing process. Whilst many clients’ understanding of key financial terms and concepts may have peaked by retirement age, there can be a noticeable decline in interpreting new information over subsequent years. It may become more common for older clients to experience lower processing speeds and challenges with multi-tasking. However, despite these changes, many cognitive functions, such as vocabulary and accumulated knowledge, can remain stable or even improve with age.

Mild Cognitive Impairment (MCI)

MCI is a condition where people have more cognitive decline than might be expected for their age, but not so much that it affects their daily life significantly. Signs might include problems with memory and challenges with decision-making or following instructions. Financial planners might notice a step-change in behaviours since they last met or spoke to the client. Perhaps they’re struggling to understand a report that you’ve sent to them? They may tend to repeat information or mention that a family member is helping them with their finances. Clear communication, allowing more time to discuss information and checking their understanding is especially important here and you may need to formalise any help from a third party if that isn’t already in place.

Dementia

Dementia is a broad term for a range of conditions characterised by severe cognitive decline that can impact daily life. Alzheimer’s disease is the most common form of the condition and symptoms can include significant memory loss, confusion, difficulty with language, and changes in behaviour. This can make daily life very challenging, primarily for the client but also for their family who may find difficulty adjusting to the changing characteristics of their loved one, along with the emotional impact and increased dependency placed on them.

You can make a big difference to clients experiencing these cognitive states as well as helping to support family members. Of course, this can be personally rewarding too, but there are some key aspects that can really help people through the advice process. These include:

1. Clear communication

Some clients might struggle with jargon or new financial terms and concepts. It's good practice to use straightforward language with your clients and provide clear written summaries to help understanding.

2. Allowing enough time

Give clients the space to think through complex decisions and offer to explain anything in different ways. Consider the time of day too; some people find they’re less tired or have more focus at different times of the day due to sleep patterns or even medication, for example.

3. Considering the meeting location

Some busy, overstimulating environments could be more tiring to older clients and it might be helpful to offer meetings at times when they are most alert and comfortable.

4. Carrying out regular reviews

These are always important but as cognitive abilities change, these could become even more essential. You may start to spot some step-changes that indicate a client needs more assistance than before, allowing you to respond accordingly and ascertain if any additional support could be offered. More frequent check-ins with the client and their family could help ensure that financial plans remain appropriate as the client’s condition progresses. This also provides you with an opportunity to look out for and address any new challenges that may arise.

5. Prioritising complex decisions

As cognitive decline can make it harder for the brain to process information and assess options, it’s advisable to tackle any outstanding major decisions sooner rather than later.

6. Long-term planning

Review estate planning and advice, such as creating or revising a will, reviewing beneficiary designations, and ensuring appropriate Powers of Attorney are in place.

7. Involving family members

Including family members or other trusted parties in some financial discussions, could provide a valuable support system to help manage finances if the client’s cognitive abilities decline further.

8. Providing additional support

Providing or referring to additional support for clients and their families about the financial implications of dementia is essential. This can include information on available resources, such as Dementia Friends, as well as a good, up to date understanding of government and local authority benefits and services.

9. Offering care advice

As a financial planner, a knowledge of the long-term care market or access to a referral partner is really useful and important. This is a complex area that many clients and families will find difficult to work through. Partnering with a care navigator, such as My Care Consultant could offer help with the associated ‘non-regulated’ aspects.

10. Researching and sharing good practice

Organisations, such as Dementia Friends, offer great resources and information sessions in this area. As more clients enter retirement and later life, understanding and knowledge in this area will be a major factor in guiding families through some challenging times. From a wider perspective, this can really help to evolve your vulnerability policy based on real-life experience.

By understanding the different types of cognitive ageing and their implications, clients can be better supported in maintaining financial stability and security throughout their later years.

For further reading about vulnerability, visit the Comentis blog library.