5-minute Finance: An Advisor’s Ethical Duty: How To Identify And Address Financial Abuse

By AMANDA CASSAR
For AdvisorNews

Looking out for your client’s best interest is your top priority – even if it means addressing delicate issues. Just as you need to recognize when market changes may impact your client’s financial future, you must also address less obvious threats like financial abuse. Knowing how to recognize financial abuse and take appropriate action will keep your client safe and demonstrate that you are a trustworthy advisor.

Know The Signs

According to NNEDV.org, financial abuse occurs within 99% of domestic violence cases, and women in romantic partnerships are most susceptible. While there is no definitive test for identifying financial abuse, there are some red flags to watch for. In relationships, it’s not uncommon for one partner to be more involved with managing the finances and paying bills. However, this becomes a cause for concern when the other partner is entirely cut off from financial decisions. The partner in control will often make purchases or investments without even mentioning it to their spouse. Additional signs include hiding assets from a spouse, giving an “allowance” and impeding a partner’s ability to get a job. They may defend their actions with reassuring statements, such as “I know what’s best for us” and “handling the money is my job.”

Be especially attentive to how couples interact with one another and if you hear these kinds of statements during client meetings -- that’s a red flag and an opportunity for you to find a way to address the situation. In cases of abuse, you may see the male partner minimizing the female partner’s thoughts and opinions, cutting them off entirely. If the woman does speak, the man might rebut what she said in a condescending manner.

Keeping notes when you are interacting with clients and monitoring their accounts does more than just jog your memory before your next meeting – it provides a tangible record of financial changes, which will be critical if you begin noticing a pattern of questionable activity. If you’ve noted any of these red flags, knowing what to do next is imperative.

Act With Care

If you suspect financial abuse, help ensure your client’s safety and maintain their financial integrity by starting a conversation with them one-on-one. Open with questions directly related to their finances, but don’t force them into discussing anything they do not want to discuss. Those who aren’t willing to engage in the conversation may become defensive or shut down. Maintaining open communication throughout the entirety of your client relationship can help ease tension and make the subject more comfortable.

Anecdotes are a great way to broach the conversation without making your client feel uneasy. Use these stories to shine light on what could happen if these patterns continue, and indicate how serious the situation could become. To illustrate this point, I like to tell my clients a story of a successful woman who went from extreme wealth to budgeting $20 a week for groceries in just a few years. She’d met a man, fallen in love and gotten married. What she didn’t realize was that over time, her husband was draining her accounts and putting all her assets in his name. By the time she figured out what was truly going on, it was too late, and everything she’d earned was legally his.

If your client confides in you, be sure to respond with compassion and empathy. Listen to them and provide reassurance that they are in a safe environment where they can talk candidly about their financial situation. If there’s any reason to believe your client may be in danger, implore them to seek help by calling the number for the National Domestic Hotline, 1-800-799-SAFE, or contacting the local authorities. You can also offer to reach out to Adult Protective Services to report a suspected case – visit napsa.org to find your state’s hotline number.

Recognizing, understanding and acting on suspected financial abuse isn’t always a clean-cut, straightforward process. You must be able to spot the signs, foster honest conversations and know when and how to act. Remember that your standing as an ethical advisor is reliant on more than just your financial knowledge, and it’s your duty to offer your clients the best advice you can, even if it means tackling conversations around sensitive topics like these.

Amanda Cassar holds a Masters degree in financial planning, and is a seven-year member of MDRT. She has been in financial services since 1991 and is the sole Director of Wealth Planning Partners in Queensland, Australia. She is the author of Financial Secrets Revealed.