Toronto advisor Rona Birenbaum, founder of Caring for Clients, says a disconnection like this requires analysis to find out where the money is going. If it’s not being used to pay down debt, maximize retirement savings or to fund a child’s education, she says, chances are the client is spending the money on something that isn’t being disclosed. If, this is indeed the case, Birenbaum says, it usually falls into one of a few different of categories.
“It’s usually gambling, drugs or the kind of thing described, which is courting another individual outside of the family structure,” she says.
In this situation, Birenbaum says she would immediately confront the client, given the relationship she and the client have and her responsibility as a financial advisor.
“I am unafraid of going there (with a client). They’ve hired me and they’re paying a fee, so they’re going to get my advice,” she says. “Typically, we do a full cash-flow analysis – money in, money out – and we can identify where those black holes are.”
Birenbaum says she would simply ask the question – What is either not showing up or that you are not comfortable sharing? By creating an environment where a client feels safe, secure and unafraid, she says her clients open up.
“I say ‘If we’re really going to accomplish anything from a planning standpoint, you really need to put all your cards on the table,’” she says. “’The walls have no ears. Let’s just get it out there and we can work through it.’”
Another advisor, Laurie Bonten of the Bonten Group in Winnipeg, agrees with Birenbaum’s approach. Having dealt with similar situations in the past, Bonten says it’s about being direct with the client and explaining the consequences of their actions. (continued.)