Alcohol on a client’s breath. A haggard appearance. Irregular account withdrawals. Missed meetings and unreturned phone calls.
All of these signs mean your client may have an addiction, so his financial plans could be in jeopardy.
Substance dependency or abuse affects one in five Canadians, says Statistics Canada. And 33% of Canadians are eventually affected by either an addiction or a mental illness. Despite the stereotypes, mental illness and addiction affect the old, as well as the young; women, as well as men; and the rich, as well as the poor. Advisors should be ready to encounter clients with addictions, be they to drugs, alcohol, gambling or something else.
What an unprepared advisor may think is just a client’s personality or the effects of a bad day may actually be signs of an addiction. Understand what’s normal for a client and notice if his behaviour starts to change, says Cynthia Caskey, vice-president at TD Wealth Private Investment Advice in Toronto.
If a client’s demeanor changes from sunny to abrasive over time, or if someone who’s generally well-groomed starts looking unkempt and unhealthy, these are indicators, says Megan Hemlow, a clinical social worker in Hamilton, Ont.
And if someone who was usually organized now often misses or reschedules meetings, neglects responsibilities or delays making decisions, these too are signs.
A big tipoff is unexpected changes to long-term financial goals, says Hemlow. If saving for a cottage was important when a client started investing and suddenly he wants to stop monthly deposits, be wary. Also watch for an increase in account withdrawals or transfers (see “Addiction indicators”).
“A general trajectory with substances and money is smaller pockets being taken out quite frequently,” says Hemlow.
With a gambling addiction, “you’re more likely to see larger sums of money being taken out,” she says. “You’re also quite likely to see folks moving into lines of credit, credit cards or loans, because intrinsic in a gambling addiction is the idea that if I just play one more time, I can win it all back.”
Discuss expectations and how to resolve conflicts or disappointments with new clients, says Karen Laprade, an advisor and facilitator at Lead Family Enterprise Advisors in Vancouver. For instance, have a written meeting attendance policy. If a client keeps missing appointments, Laprade would refer him back to the expectations.
“It’s not that we’re slapping people on the wrist,” she says. “We’re just returning to what our original agreement is and wondering, […] ‘Can we problem solve?’ ”
Advisors may be reluctant to ask sensitive questions about all health, including mental health. But Laprade encourages asking at the beginning of a client relationship.
Find out if addiction is something a client is worried about, or if it has impacted family.
“Some people are a little surprised by that question,” she says. “But other times they feel they need to put that information on the table. It needs to be presented as, ‘This is our opportunity to make sure we’re covering all the bases.’ It’s an extension of our role in helping clients protect their wealth,” she adds.
If a client’s behaviour becomes worrisome, this talk gives an advisor grounds to ask about it. When raising the topic, use examples of times a client’s financial plan has been impacted by his behaviour without being accusatory, says Hemlow.
She suggests saying: “I’m concerned this isn’t on track with the plan we’ve discussed. I’m wondering if there’s something going on that I’m not aware of or something has changed.”
But whether or not a client admits to a problem, professionally, the advisor is on untested ground.
Compliance expert Jonathan Heymann, president of Wychcrest Compliance Services in Toronto, says he’s yet to work with a firm that has specific policies for dealing with clients who have addictions.
“It is a problem that’s out there, but I don’t think it’s being adequately addressed,” he says. Still, an advisor should notify her compliance department if she believes a client has an addiction, and they’ll help decide what to do.
Regulators don’t have specific rules or guidance for advisors either.
Instead, IIROC rules require advisors to “observe high standards of ethics” and to “use due diligence to learn and remain informed of the essential facts relative to every customer.”
Under the best interest standard proposed by CSA last April, an advisor “should recognize that significantly more care and diligence is required for at-risk or vulnerable clients.”
Right now, securities laws require an advisor going through KYC to “make reasonable inquiries as to the reputation of the client.” Inadequate discovery means an advisor isn’t meeting suitability requirements.
What to do
If your client tells you he has an addiction, have a list of mental health professionals ready. “Just as you have a list of a few lawyers you make referrals to, have a list of a few therapists,” says Laprade.
Advisors at some banks can refer clients to a pre-vetted medical partner. Otherwise, Laprade says to find a registered psychologist, who can then refer the client to a psychiatrist or other professional as needed.
Social workers and addictions counselors can also help your client, says Ian Macnaughton, principal of Vancouver’s TransitionPoint Coaching, which helps wealthy families deal with conflict.
There are a variety of treatment approaches, he adds, so warn clients the professional may not be a perfect fit. He tells clients he appreciates feedback on referrals so he can help find someone else if necessary.
Laprade goes further. “It’s not enough just to make a phone call. There’s a strong impact when you say, ‘I’ll organize the first meeting. I’m happy to attend with you.’ At the meeting, the advisor may give a bit of information, but it’s the support and the connection that’s important.”
Sometimes, a client’s family may reach out for help. Unless the person who comes forward is a joint account-holder, advisors can’t disclose anything about a loved one’s financial circumstances, says Heymann.
Advisors must ensure joint account-holders know what’s happening with accounts, says Caskey. When she’s worried about a client, she brings her concerns to her manager. Together they have held conference calls with both accountholders to ensure everyone knows about potential portfolio changes or withdrawals.
The worried family member could probably use some emotional support too, says Macnaughton. Offer to connect him with a therapist, or to a support group for family and friends of people with addictions.
You could also offer to set up a family meeting. Macnaughton says the family should guide the gathering, but the advisor could open the conversation by explaining its purpose.
A client may not admit to or understand his addiction. Clients may be wary about telling their advisors about their weaknesses, says Caskey. “They’re afraid we’re going to judge them,” she explains.
Even if a client denies having an addiction, tell them you’re always available to help.
Capacity lawyer Jan Goddard, partner at Goddard Gamage Stephens in Toronto, remembers a client with a mental illness. While it wasn’t the case with this client, 30% of people diagnosed with a mental illness will have a substance abuse problem in their lifetimes.
After a few years of working together, the client came to a meeting, and Goddard thought something was wrong.
“I just had this sense that he was not as well as he had usually been,” she recalls. She told him she was worried about him, and asked him to call her if he ever considered harming himself.
The next week, he came back to her office and asked for help. “We went in a cab to the hospital, and I stayed with him until he was admitted,” says Goddard.
Beyond that, advisors’ options are limited. For instance, an advisor can’t prevent a client from taking money out of an account if the investor gives proper instructions, says Heymann. An advisor should take extra care to document her interactions with the client, adds Caskey. “Keep notes around the types of meetings [and] conversations they’re having, the location of those conversations, as well as the length of them,” she says. “The more detail the better.”
Addiction and capacity
Advisors and families watching as someone is consumed by addiction may wonder if there’s a legal way to intervene. The answer, in the majority of cases, is no.
Most people with addictions don’t meet the definition of mental incapacity that courts use to appoint a guardian, says Goddard. In that case, they’re legally entitled to make bad choices.
A better route for a client with a history of addiction may be to set up a safeguard in case of a relapse.
One strategy is a springing power of attorney, says Goddard, who warns it’s difficult to draft.Springing PoAs are triggered when the specific set of circumstances it outlines are met, she explains. The problem with designing one to come into effect when someone relapses is anticipating the exact circumstances.
“You really have to think through well what’s happened in the past, and how would this be proved,” she says.
For instance, if someone starts drinking again, what’s the line between use and abuse of alcohol? Or if the client wants his physician to weigh in, what if the doctor retires? If the trigger would be signs someone isn’t taking care of himself or his finances, what exactly would they have to neglect? The PoA must be specific and take into account as many scenarios and contingencies as possible.
Once the PoA has been established, the attorney could have difficulty exercising it. Further, “the bank’s going to want a copy of whatever documentation there is around the fact that the trigger has been pulled, and now that’s going to sit in the bank’s file,” says Goddard.
Instead, a two-part arrangement would protect a client’s privacy. First, the client’s lawyer would hold a formal direction, detailing the addiction behaviours that would trigger a general PoA.
If those specific conditions were met, the lawyer would hand the general PoA to the attorney. The general PoA would authorize the attorney to act, but wouldn’t contain details about the client’s addiction.
Putting a springing PoA into place would require a client to be frank about his addiction. “I couldn’t draft something like that for a client unless the client actually said to me, ‘These are the kinds of things I’ve done in the past, and I don’t want my money to be lost because I do them again in the future,’ ” says Goddard.
Advisors can work with clients with addiction issues to set natural financial limits to their actions. In that case they may consider an annuity or segregated fund.
Though these can be costly, they would give clients capital protection and stable income for life. If those aren’t suitable, consider keeping investments in a traditional portfolio and revisiting risk tolerance and capacity.
Risk tolerance can be tricky for a client with a gambling addiction, adds Hemlow. He may profess to have high tolerance, but investing itself could be an addiction trigger because it reminds the client what it’s like to win money, she explains.
“If you’re working with someone with a gambling addiction, you might want to gently recommend they go a safer route for now,” she says.
There can be a two- to three-month waiting time for addictions treatment in Ontario, says Hemlow. But if your client has private insurance or can pay, he can start treatment in days.
Laprade warns wealthy clients may think checking into rehab will get them the best care, but that’s not always true. There are a variety of inpatient and outpatient treatment options. And if the client is taken away from his community, it can be traumatic.
As a client starts recovery, call to check in and offer to go for coffee because he could be feeling isolated—and isolation could lead to a relapse.
Also, identify financial triggers. If a client gets government benefits, a tax refund or trust money, having this cash could provoke a relapse, says Hemlow. Ask the client how he plans to manage the money appropriately, and offer to set up an automatic transfer to an RRSP or another account that’s harder to access.
With the client in recovery, advisors or family members may want to start addressing financial matters, especially if the client’s addiction has harmed a family business or trust. Remind people to be patient, says Laprade. She warns that asking the client to make decisions too early can jeopardize his recovery, and have a negative impact on the family and business.
Supporting a client with an addiction takes advisors well beyond their traditional role of offering financial advice, but Laprade says it’s imperative.
“We can’t see our clients or their families as one-dimensional. Our best work will come from better understanding.”
Professionals who can help
Psychologists’ Association of Alberta
Alberta Health Services addictions helpline: 1-866-332-2322
British Columbia Psychological Association
Alcohol and drug information and referral service: 1-800-663-1441
Manitoba Psychological Society
Addictions Foundation of Manitoba: 1-855-662-6605
Association of Psychology in Newfoundland Labrador
Health and Community Services addictions services: 1-888-737-4668
Association of Psychologists of Nova Scotia
Addiction Services Offices: 1-866-340-6700
Ontario Psychological Association
Connex Ontario drug and alcohol referral helpline: 1-800-565-8603
Connex Ontario problem gambling referral helpline: 1-800-230-3505
Prince Edward Island
Psychological Association of Prince Edward Island
Health PEI addiction services: 1-888-299-8399
Psychology Association of Saskatchewan
Ministry of Health HealthLine: 811 or 1-877-800-0002
Association of Psychologists of the Northwest Territories
North West Territories Department of Health and Social Services: 1-800-661-0844
Nunavut Kamatsiaqtut Helpline: 1-800-265-3333
Yukon alcohol and drug services: 1-800-661-0408, Ext. 5777