Report Shows Financial Impact of Diminished Capacity


Last updated 5/1/2021 at 1:46pm | View PDF

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 U.S., with an estimated 83% of all assets owned by individuals over the age of 50, accoding to the AARP 2016 report The Longevity Economy.

As the U.S. population ages over the next decade, the concentration of wealth in the hands of older adults is likely to accelerate.

The aging of the U.S. 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. 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.

This suggests that 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; and

• 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 ( The whitepaper is available at


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