Guide to Planning For and Managing Diminished Financial Capacity in Clients

Unusual spending. Abrupt changes in a will or beneficiary designations. Struggling to keep track of basic household finances. The signs of diminished capacity often show up first in a person’s financial life, which puts CFP® professionals in a position to demonstrate extraordinary value for clients at every stage of life. Failing to prepare for diminished capacity can leave clients more vulnerable to financial mistakes, exploitation and asset depletion.

CFP Board designed the Guide to Planning for and Managing Diminished Financial Capacity in Clients to equip CFP® professionals with practical guidance on preparing for and navigating these situations with sensitivity and confidence.

Diminished capacity can affect anyone, of any age or health status, so preparing for it is a natural fit in any ongoing, holistic Financial Planning engagement. The guide explains that there are two simple preparatory steps a CFP® professional must take within a reasonable time of beginning a Financial Planning engagement that includes monitoring:

• Provide the Client with the opportunity to designate one or more trusted contacts with whom the CFP® professional is authorized to share information when concerns arise.
• Recommend that the Client develop an appropriate estate plan, which may include creating a durable financial power of attorney.

The CFP Board Ethics CE program that will run from January 2027–December 2028 will discuss these requirements. A CFP® professional will have a year to incorporate the requirements in their practice after attending that Ethics CE course.

The guide also includes other practice tips. Among other things, it:

• Explains why the Duty of Confidentiality, which has no built-in exception for clients with diminished capacity, makes advance planning critical.
• Addresses Financial Planning considerations that may become especially important as clients age, including conversation starters for raising these sensitive topics.
• Identifies red flags for diminished financial capacity and warning signs of financial exploitation.
• Provides best practices for managing the engagement once a Client shows signs of diminished capacity, such as communication practices that facilitate understanding and measures that may help protect the client’s assets.