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Dale Jackson

Personal Finance Columnist, Payback Time


Most veteran investment advisers have a story to tell about an aging client who seemed to be off during a regular meeting.

Sometimes they repeat themselves. Sometimes they seem to have trouble grasping concepts the adviser knows they understood in the past.   

It’s happening more often as the baby-boom generation heads into retirement. Advisers often spot signs of dementia in clients before family members because contact is periodic and financial matters tend to expose mental lapses.

As a result, many advisers are feeling overwhelmed and unqualified to spot early signs of mental illness. 

The Canadian Securities Administrators (CSA), an umbrella organization of provincial and territorial securities regulators, is hoping to provide some overdue relief.

Starting in the new year, advisers are being directed to request clients provide a Trusted Contact Person (TCP) to alert if the adviser has concerns about a client’s ability to make financial decisions, or if advisers suspect a client is being exploited.

The CSA has also given advisers the power to place temporary holds on transactions if they suspect a client is suffering from dementia.

But for many advisers, requests are not enough. As a collection of provincial and territorial regulators, the CSA does not have the authority to require advisers to obtain a TCP, or require clients to provide one. Rules surrounding clients showing signs of mental illness vary from jurisdiction to jurisdiction. 

Even if a TCP is on file, there is no guidance for the adviser beyond contacting them with their concerns.

The new measures also put advisers in an awkward - and possibly litigious - position. In addition to being asked to make mental health assessments, they are being put in a position to make financial decisions on behalf of a client based on those mental health assessments. An adviser could be placing a hold on a transaction believing a client is not able to make a rational investment decision when they are merely experiencing a temporary memory loss, or just having an off day, or is distracted by other matters. 

The 13,000-member association of Canadian financial advisers, Advocis, has asked regulators to provide more clarity, sharper teeth, and legal protection for advisers through a “safe-harbour” provision which would protect the adviser from potential liability.

In the meantime, Advocis is urging members to follow the CSA directive to request TCPs from clients and document that the request was made. It suggests advisers attempt to do it when they do their mandatory know-your-client reviews every two years.   

Advocis currently sponsors workshops for advisers dealing with client mental health issues through its local chapters. A special financial adviser designation known as Elder Planning Counselor (ECP) is also offered to help advisers spot early signs of dementia. One strategy it teaches is to quiz clients by asking them questions that are already on file such as their power of attorney, lawyer, or accountant.

Currently, many advisers who suspect a client’s mental capacity is waning will try to involve family members; but in some cases the clients are estranged from their families. In other cases, family members could be the very people trying to exploit the client for their own financial gain.

A last resort would require passing the matter over to a power of attorney, which is a legal document that gives one or more people the authority to manage a person’s money and property if a doctor determines that person is unable for mental or physical reasons. 

However, clients are also under no obligation to appoint a power of attorney when dealing with financial advisers. 

In addition, that power must be established by the client at a time when their mental state is not in question. By the time an adviser suspects mental illness in a client, it might be too late.