Considering the appropriate time to seek professional financial advice is sooner
than you think. It is imperative to seek professional advice and establishing
safeguards to protect your finances before it is too late. Christopher Tonetti, an
associate professor of economics at Stanford Graduate School of Business and a
senior fellow at the Stanford Institute for Economic Policy Research, produced a
research paper titled “Cognitive Decline, Limited Awareness, Imperfect Agency,
and Financial Well-Being.”[1] Tonetti found the majority of people interviewed
were concerned that they would hold on to control longer than they should and, by
doing this, increase the chance that they would make a big mistake with their
finances.
Another key insight highlighted by the study is that people have limited awareness
of their mental health. The onset of cognitive decline is often slow, and as a result,
its symptoms can be difficult to recognise, particularly when people live on their
own. However, people with significantly impaired cognition may be unwilling to
hand over the reins of their finances.
“Given people have this limited awareness of their mental health, a desire to stay in
control of their finances, and, importantly, a desire to pass control when decline
sets in, we ought to have ways to help them understand where they are in terms of
decline,” Tonetti says.
Suggestions to make easier for older people to instigate a financial handover at an
appropriate time include a doctor conducting regular screenings that indicate a
person’s competence in managing their finances and people having early
conversations with their trusted financial advisors and/or family to plan what a
transfer of control would look like and what might trigger the timing of the transfer.
Listed below are common financial mistakes and pitfalls that can occur when
people’s ability to manage their finances begins to diminish and assistance should
be sort:
· Not adjusting investment strategy
· Underestimating longevity & healthcare costs
· Neglecting to update estate planning documents
· Overlooking inflation risks
· Failing to develop a comprehensive retirement income strategy
· Ignoring tax-efficient strategies
· Excessive debt
· Poor spending habits
· Missing or late payments
· Falling for scams or fraud
· Losing track of financial documents
· Disorganised financial records
· Neglecting professional guidance
It is important to identify these common issues early via periodically reviewing the
financial strategy and its implementation. Taking steps, such as automating routine
transactions and using organisational tools can assist. It is also important to have
appropriate documentation in place, including the establishment of Enduring Power
of Attorneys, to further safeguard your interests. More importantly, seeking help
from a financial advisor can help mitigate these risks and establish important
safeguards to protect assets and estates.
Footnotes:-
[1] https://www.gsb.stanford.edu/insights/when-it-too-late-give-control-your-finances