10 Red Flags for Recognizing Diminished Capacity

Over the years, we’ve worked with many clients whose parents or other relatives have reached ages where physical or cognitive decline has become a regular part of their lives. While physical incapacity is generally easy to spot, cognitive problems may start occurring well before anyone detects them, including the person suffering from them.

One of the first areas affected by diminished capacity is the ability to understand and make financial decisions. This can lead to poor choices regarding finances and open seniors up to potential financial fraud and abuse by others.

Below are some red flags for children and caregivers to watch for with their loved ones. This list was compiled by the SEC and FINRA regulatory authorities based on common trends they see with investors.

  1. Appears unable to process simple concepts.
  2. Appears to have memory loss.
  3. Appears unable to recognize or appreciate consequences of decisions.
  4. Makes decisions that are inconsistent with his or her current long-term goals and/or commitments.
  5. Demonstrates erratic behavior.
  6. Refuses to follow appropriate investment advice, especially when it is consistent with previously agreed upon investment objectives and risk levels.
  7. Is concerned or confused about missing funds in his/her account, even though reviews show there were no unauthorized money movements.
  8. Does not understand recently completed financial transactions.
  9. Appears to be disoriented with surroundings or social setting.
  10. Appears uncharacteristically unkempt or forgetful.

If you have identified several of these signs in someone close to you, it’s time to take action to address it. The problem will not improve on its own.

Inform other family members, so they are on the lookout for unusual requests or behavior. Talk to your parents’ financial advisor so he or she can make sure that any trading or withdrawal requests are legitimate.

When it comes time for you to speak with your parents about these signs, seek resources that can help with this conversation. It is an extremely difficult topic to address, but there are websites, books and people available to help you initiate and navigate the discussion.

At Slaughter Associates, we are working with our clients and brokerage firms to establish procedures that provide permissions to share concerns within our relationships with a trusted contact named by our clients. This gives us a tool to step in and support our aging clients as well as their adult children.

As America’s population continues to rise in longevity, cognitive decline will become an issue that surely affects everyone in one way or another. Being prepared to identify and act when your family needs such support is the best planning you can provide.