Diminished Mental Capacity and Cognitive Decline
Knowing your client (KYC) comes with big responsibilities (cue Spiderman) and part of that is knowing when and how to identify when your client’s encounter diminished mental capacity and cognitive decline (again, cue Spiderman).
How do you know how to identify diminished mental capacity in your clients? This can be one of the most difficult tasks of a registered person. Sometimes you might suspect something isn’t quite right, but it’s hard to identify when it crosses a particular line.
There are helpful resources available through the Canadian Association of Retired Persons (CARP) but equally helpful is the guidance provided by the Canadian Securities Administrators (CSA), Ontario Securities Commission (OSC), Alberta Securities Commission (ASC) and other regulators and Self-Regulatory Organizations (SROs). Several define diminished mental capacity red flags in their websites.
According to the CSA,
“a registrant will encounter clients who suffer from diminished mental capacity has increased with the rising demographic of older individuals. As the human body ages, it is normal for changes in the brain to take place. These changes may not have a noticeable effect on one’s ability to perform routine financial tasks, such as paying bills, but can become more obvious when one faces more complex or unfamiliar financial decisions, such as deciding to buy or sell investments. While issues of diminished mental capacity are often associated with aging, we recognize that these factors may affect different individuals at different points in their lives, and to significantly different degrees. Registrants can be among the first to notice signs of diminished mental capacity. These signs may arise subtly and over time.”
Some of the things that the CSA recommends registrants keep an eye out for include:
- memory loss
- difficulty completing forms
- difficulty understanding important aspects of investment accounts
- confusion
- Unkempt appearance
- (And others)
(CSA Staff Notice 31-354 Suggested Practices for Engaging with Older or Vulnerable Clients)
When there are red flags of diminished capacity, it might be important to reach out to the Trusted Contact Person (TCP). Hopefully you’ve already collected this information from most of your clients. In the event that you see red flags of suspected financial abuse, you may need to reach out to the TCP:
- Potential Financial Exploitation
- Mental capacity or lack of ability to make financial decisions
Our courses on Powers of Attorney (POA), Protection Mandates (PM) and the Trusted Contact Person (TCP) and Older & Vulnerable Clients walks you through the details of red flags of financial abuse to help you identify diminished mental capacity and cognitive decline in your clients. It’s sometimes difficult to know when it’s right to reach out and this course will help. Also, this is one of the most important roles you play as a registrant, a gatekeeper of the capital markets and protector of your client’s interests. Our course comes with a TCP form and assignment to help you conduct a spot audit of your existing client files. And, we think they’re really fun and interesting continuing education courses too.