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Advisors who have clients with mental health conditions are uncertain about how they can help them without breaking client confidentiality and privacy regulations.

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Financial advisors who are seeing unusual client behaviour are far from alone. Various mental health conditions are affecting many investors significantly, and with the COVID-19 pandemic triggering more stress among Canadians, advisors are looking for tools and training to help their vulnerable clients.

According to recent research from Navigator Ltd., 92 per cent of advisors are seeing anxiety, dementia, Alzheimer’s disease, depression, gambling, substance abuse and medication impairment – and these conditions are affecting clients’ decision making.

Furthermore, 74 per cent of advisors surveyed reported that family members are having a negative impact on investors' decisions. Almost half of advisors (46 per cent) have clients who might be susceptible to elder financial abuse while 31 per cent suspect some of their clients are under family pressure or financial abuse by a spouse or partner. As such, advisors expressed particular concern about dealing with aggressive family dynamics.

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Advisors facing any of these conditions are uncertain about how they can help clients without breaking client confidentiality and privacy regulations. Some advisors are starting to turn to the trusted contact person (TCP), which is used widely in the medical and mental health world as a way to get patients help without breaking their confidentiality.

The TCP enables advisors to obtain upfront client consent to contact a trusted third party if advisors are concerned about a client’s mental state or if the client is in an abusive situation. A TCP has no financial decision-making authority but can intervene and seek medical and legal help for the client without running afoul of privacy concerns. The TCP is gaining traction in the financial services industry as a third of advisors currently use it while many others are waiting for their firms to approve it.

Advisors also want clear direction on how they can step in to protect vulnerable clients. Specifically, 89 per cent say they would like “safe harbour” regulations so they can take urgent, short-term and protective action when there are signs of mental vulnerability or financial abuse. In addition, 74 per cent support sharing information between advisors and firms if a vulnerable client requests to transfer funds to another advisor abruptly.

According to Navigator’s research, advisors got into the financial services industry because they liked investing, but soon found out that client relationships involve substantial counselling and caregiving. Advisors said they need an entirely different set of interpersonal skills to work with mental health and aggressive family situations. In fact, 83 per cent of advisors say they want more professional training and accreditation to respond to how mental health and family dynamics can have an impact on financial planning.

The pandemic and resultant isolation have added extra layers of concern for advisors' clients. Advisors report that clients showed a surge of interest in life insurance, will reviews, setting up powers of attorney and generally “getting their [financial] houses in order.”

Advisors said clients were initially “scared, stuck and in a state of panic with a heightened sense of anxiety” when the pandemic first hit. Most advisors calmed clients' anxiety and prevented them from abandoning their financial plans. They pointed clients to the emergency funds that were set up in their financial plans and reinforced how their diversified plans were designed to provide a cushion against volatility.

What clients really wanted, though, was “direction, confidence and comfort.” Older, isolated clients wanted more contact and connection with their advisors. But advisors avoided e-mail because of the proliferation of e-mail scams targeted at seniors. Communication through videoconferencing and telephone was also challenging as advisors reported difficulties assessing client comprehension, body language and facial expressions. Some advisors reached out to their clients’ TCPs for additional support to make sure their clients received and understood information.

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Advisors said that “absorbing” clients’ anxiety can be overwhelming. They described being “financial caregivers, counsellors and a bridge between family members – some of whom were aggressive and trying to influence their clients.” To cope with stress, advisors leaned on their teams to provide each other with the support and flexibility needed to handle long hours and challenging situations. Some role-played with team members to prepare for difficult client calls.

Although financial advisors are well-positioned to detect changes in clients’ behaviour and vulnerability that can lead to poor financial decision making, dealing with these complicated situations requires more than financial planning skills. Advisors can benefit from more professional training on how to work with clients who are experiencing mental health challenges and family interference. The industry can also help by offering more tools such as the TCP and safe harbour regulations to help advisors protect clients against poor decision-making, improper family interference and abuse that can threaten clients' financial security.

Carol Lynde, is president and chief executive officer of Bridgehouse Asset Managers and Anne Kilpatrick is principal at Navigator, which have partnered on five research studies to investigate the role that mental health plays in the financial advice relationship. The data included in this piece were obtained in surveys conducted in October 2019, May 2020 and August 2020.

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