ProtectionSep 24 2020

How to advise older clients whose mental health is deteriorating

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
How to advise older clients whose mental health is deteriorating
Photo by Serena Koi from Pexels

Mental ill health can affect any of us, at any time in our lives, and for any reason. 

But with increasing age often comes increasing frailty - and that can include a deterioration in mental health.

Whether this is because the person's existing mental health condition is becoming increasingly problematic for them, or because of a diagnosis of dementia, advisers can end up facing the prospect of a long-standing client becoming deeply vulnerable. 

This not only presents emotional problems for the adviser - who may have known the client for many, many years - but also presents additional challenges to overcome. 

Traditional financial planning will always build into the retirement pot the expectation of a higher expenditure later on in life as actuarial assumptions about long-term-care and additional needs come into play.

So financially, a good pension plan will have factored in the costs of having a home help or even the client needing to go into a nursing or care home.

But while this plan would have been laid out, and stochastic modelling charts showing anticipated income and expenditure, as well as variations due to drawdowns or market shocks, presented to the client while they are in good health, this sort of conversation cannot be had with a client who no longer has the capacity to understand it. 

Hundreds of thousands of people are making complex decisions about finances into old age, when the risk of developing illnesses, such as dementia, increases. -- Peter Hamilton

In a recent webinar with FTAdviser, Jon Scannell, distribution director for Legal & General Retail Retirement Income, noted it is useful to pay attention to a variety of factors when it comes to determining how to stretch the pension pot to cover any contingency - including living longer into ill-health.

During the webinar, he told listeners there were 'four Ls' that could prove a good starting-point for conversations around making the pension pot last. 

These are: "Legacy, Liquidity, Lifestyle and Longevity". At the time, he said the challenge is for advisers to be able to balance client expectations for retirement with the facts around lifestyle, health, mortality and the various other risks that can have an effect on a pension pot.

Peter Hamilton, head of retail protection for Zurich, stresses it is important to make sure the advice process is thorough enough to cover such complicated later-life questions.

He comments: "Getting expert financial advice can help people to make the most of any savings as well as putting in place valuable protection to help manage complex issues like inheritance tax liabilities."

Other considerations

But it is not only savings advice, and making the money stretch as far as possible that is uppermost in a financial adviser's mind when it comes to clients whose age-related mental incapacity is presenting concerns. 

There are myriad other considerations, such as arranging wills, making sure any assets that might be passed to the next generation are done so as tax-efficiently as possible, and ensuring that the client's wishes are indeed their wishes.

This latter issue is a point often contested in court as to whether the client was in their right mind when they made or amended their final last will and testament.

This is where working with legal professionals, tax experts and even third-party specialists such as medical professionals can help the adviser do the very best thing for older clients whose mental ill health presents particular challenges.

Practically speaking, other things ought to be considered. Andrew Wilkinson, director of Moneysworth comments: "In terms of possible protection insurance needs, people with mental health conditions are just like anyone else.

"Needs could range from funeral expenses, protecting family, leaving something for loved ones through to inheritance tax planning. In some cases some may depend heavily on a carer, possibly a family member, the loss or incapacity of whom could have serious knock on effects for persons cared for, both financially and practically.

"In business protection jargon, such carers are often a ‘key person’ and consideration should be given."

Zurich's Mr Hamilton adds other things to consider is helping a client to set up a lasting power of attorney. He says: "An LPA or deputyship can be a very important part of advance planning for a time when a person may not be able to make certain decisions for themselves."

Sadly, this is often overlooked by clients. Research carried out by Zurich last year showed that seven in 10 people in retirement had not set up an LPA.

According to Mr Hamilton: "This means hundreds of thousands of people are making complex decisions about finances into old age, when the risk of developing illnesses, such as dementia, increases."

Covid-19 may have spurred more people into action; anecdotally more people have set about organising their wills, just in case the worst should happen. 

But when it comes to vulnerability, especially when the mental health of a client might be called into question, this can be a lifeline for the family.

Mr Hamilton adds: "Registering a LPA enables family and friends to quickly step in to help vulnerable people manage their financial affairs without facing a lengthy court process."

To give advisers support with this aspect of later life planning, Zurich has produced an interactive guide which can be found online at www.zurich.co.uk/tools-and-guides