Financial advisors have several ways of dealing with clients who may be behaving erratically, including freezing their accounts. But what’s the course of action when it’s the advisor exhibiting cognitive decline?

“[T]he awkward part of the conversation [is] it’s not just clients. It’s me, it’s you, it’s financial advisors. None of us is immune from capacity issues down the line,” Kyle Witschen, director of compliance at Raymond James, said during the firm’s 2022 Elevate conference.

“I have a power of attorney. Do I hope I never need it anytime in the near future? Of course. But I might, and at least I have the peace of mind of knowing that it’s there," Witschen said at the May event. "Be self-aware. Trust your family if they say something,”

The American Psychological Association defines cognitive decline as weakening of in one or more cognitive abilities, such as memory, awareness, judgment and mental acuity.

Last month, police arrested a 90-year-old Morgan Stanley advisor, Leonard Bernstein, in Oklahoma City after he allegedly shot his business partner in one of the firm’s branches. After the shooting, Bernstein calmly left the branch and drove away, according to witnesses.

No motive has been publicly identified for the shooting, and no one has publicly questioned Bernstein’s cognitive state. But at least one former colleague of Bernstein reached out to FA-IQ to raise questions about his state of mind.

The shooting was entirely out of character for Bernstein, according to the advisor who worked with Bernstein from 1994 to 2004, who declined to be named. The advisor speculates that Bernstein was subject to a sunset deal, in which he was being removed from client accounts, while simultaneously experiencing cognitive decline.

“When they said he was transitioning accounts, that is what they call a sunset provision. They made some kind of deal with him, whether it’s forced upon him or whether he agreed to it to get some kind of income,” the advisor surmised.

“Folks who start to lose their cognitive level, there’s a symptom of agitation when dealing with things that don’t make them happy and another one is paranoia,” the advisor added.

Morgan Stanley gave no comment in response to questions about whether Bernstein and his business partner were involved in a sunset deal and whether anyone had ever suggested that Bernstein might be experiencing cognitive issues.

FA-IQ reached out to Bernstein for this story but did not receive a reply as of this writing.

Firms' Responsibility

Firms have a responsibility to address cognitive decline among advisors, according to Ron Edde, founder, president and chief executive officer at recruiting firm Millenium Career Advisors.

“If you are a supervising firm and you begin to see signs of cognitive decline, then it’s incumbent upon the firm to take action on behalf of the clients, and I think most advisors would probably agree with that,” he said, talking about cognitive issues in general and not specifically referring to what happened at the Morgan Stanley branch.

One option is for advisors to be required to take a cognitive test after they reach a certain age, according to Edde.

Advisors who are 55 or older make up 43% of the industry headcount, and the average age of an advisor is 51, according to 2020 data from Cerulli Associates.

“In some states, after you cross a certain age, you have to pass an annual driving test or you don’t get to keep your driver’s license,” Edde said, noting the industry would benefit from applying similar tests to advisors.

For example, drivers in Ohio aged 65 and older must renew their licenses every four years while those in Pennsylvania aged 75 and older must do so every two years, according to the Insurance Information Institute.

“I think — particularly if somebody’s an active portfolio manager, has that designation, has that authority — after a certain age they probably should be subjected to annual or biannual cognitive tests in order to maintain that particular credential,” Edde said.

“It becomes imprudent not to be paying closer attention to this and not to do something to be proactive in trying to prevent any kind of problems,” he added.

Edde said he expects to see regulations relating to the cognitive ability of advisors.

“I suspect that the regulatory apparatus out there is going to start putting additional pressure on firms to keep an eye out for signs of this and to take action if they are detected,” Edde said.

A Financial Industry Regulatory Authority spokesperson declined to comment on whether the industry self-regulator would be looking into the mental or behavioral acuity of advisors when they reach a certain age or whether it is considering issuing relevant guidelines on how the industry should handle such issues.

The North America Securities Administrators Association has said that financial services companies need to be proactive about the issue of diminished capacity in an aging force of professionals. One in 10 people in the U.S. aged 65 and over has Alzheimer’s dementia, according to a 2019 report from the Alzheimer’s Association cited by Nasaa.


Managers at wirehouses “have to be concerned that they can trust their advisors,” according to Danny Sarch, president at recruiting firm Leitner Sarch Consultants.

“You want to prevent litigation in a litigious society dealing with arguably one of the most sensitive things that anybody deals with, which is their wealth,” Sarch said. “Advanced age is another variable that has to be looked at.”

Broker-dealers aren’t oblivious to cognitive decline issues, according to Jeff Nash, chief executive officer of recruiting firm BridgeMark Strategies. They “have absolutely had to deal with advisors going through cognitive decline,” he said.

The firms typically take “a proactive role” to ensure that books of business are transferred between advisors in a succession planning strategy, Nash says. Some broker-dealers will even buy an advisor’s business should an emergency arise and then seek out other advisors within the firm to buy that business, he adds.

Edde says that some firms are at greater risk than others: they have a higher percentage of older advisors, or they aren't proactive in encouraging older advisors to retire and turn their books over to another advisor.

The risk of cognitive decline is “a good proof point” for teaming, according to Louis Diamond, president at recruiting firm Diamond Consultants.

“If they’re around people who can either pick up the slack or at least have a lens into how someone acts on a day-to-day basis, that’s a good watchdog item,” Diamond said, adding that there’s more of a risk for advisors who operate alone. “No one wants the client to be disserviced and if someone’s performance starts to slip, then it’s in everyone’s best interest for them to speak up.”

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