Financial Planners are likely to face increasing numbers of clients suffering from signs of cognitive decline, according to a new guide from the Financial Vulnerability Taskforce (FVT) campaign group.
The FVT says that with one in three people likely to suffer from dementia, cognitive decline among clients is fuelling a growing challenge for advisers.
The taskforce is calling for “greater awareness and practical support” to help firms navigate any difficult decisions.
The Taskforce says the advice profession needs greater awareness and confidence, supported by clearer processes and practical guidance when concerns arise about a client's decision-making, whether through cognitive decline, illness, injury or other factors.
To support firms, the FVT has published a new guide in partnership with provider Just called: ‘Delivering Good Client Outcomes When Decision Making Becomes a Concern.’
The FVT says the guide helps firms recognise potential capacity issues, understand their responsibilities and gain confidence in taking the right next steps to protect clients while respecting their wishes and rights.
Robin Melley, chair of the Financial Vulnerability Taskforce and a Chartered Financial Planner, said: “This guide provides an overview of mental capacity and decision making in the context of the Mental Capacity Act 2005 and why this matters to financial advisers. This is not about turning advisers into clinicians but about ensuring firms have the confidence, processes and practical guidance to respond appropriately and to continue delivering good client outcomes.”
The guide has been reviewed by Professor Keith Brown, a leading experts on safeguarding, mental capacity and adult social care, and seeks to dispel a number of common misconceptions including:
• People are often assumed to either have capacity or not have capacity. The FVT says that In reality, capacity is decision-specific and can fluctuate over time. Someone may have the capacity to make certain decisions while needing additional support with others.
• Being a client's next of kin gives them authority to make financial or medical decisions. Many families are unaware that it has no legal status and generally requires arrangements such as a Lasting Power of Attorney.
• A best interests decision is what family members, professionals or advisers believe is best for the individual in question. Decisions made on behalf of someone who lacks capacity to make a specific decision must follow the principles set out in the Mental Capacity Act, including considering the individual's wishes, feelings, values and beliefs, and involving them in the process as far as possible.
CEO of FVT parent body the Consumer Duty Alliance, Keith Richards, said: “Mental capacity concerns are likely to affect many of us in later life and can impact a number of Consumer Duty outcome expectations, which is why we want to support the profession to consciously recognise and take action earlier. Through greater understanding of the issues, establishing appropriate processes and having the confidence to adapt their approach, better equipped advisers and support staff will be able to fulfil their obligations under the Duty, including avoiding foreseeable harm.”
Martin Lines, development and events director at Just, said: “By applying the principles in the guide and understanding the different types of cognitive ageing and their implications, financial advisers will be better equipped to recognise when clients may need additional support and adapt their approach accordingly. This will help advisers navigate potentially complex and sensitive situations with greater confidence so that clients can achieve better long-term financial outcomes.”
The Financial Vulnerability Taskforce (FVT) was launched in 2021 and is an independent representative body covering the retail finance sector. Its aim is to promote greater understanding of vulnerability and help firms develop appropriate knowledge, behaviours and good practice when dealing with clients in vulnerable circumstances.
Download the FVT Decision Guide here
• Financial Planning Today Analysis: With a rapidly ageing population to cope with and a client profile leaning towards older population segments, cognitive decline and decision making for this group may well be the next frontier for Financial Planners. Planners will have to deal with an increasingly ageing client base and getting it right may be a challenge. This timely guide and other initiatives point out the reality, which is that making decisions for clients suffering capacity challenges is a growing minefield and more training and education is vital.