Why good KYC is a natural defence against financial gaslighting

To help detect and prevent economic abuse, advisors working with couples must walk a fine line

Why good KYC is a natural defence against financial gaslighting

Financial gaslighting is a harsh reality for untold numbers of women, though thankfully it’s not common in the world of wealth planning. And with the right processes and best practices in place, it should stay that way, according to two preeminent women advisors.

“I definitely haven't seen it in my practice. And I frankly, I hope I don't,” says Julie Shipley-Strickland, senior wealth advisor at Wellington-Altus Private Wealth (pictured above, left). “I would never want someone to be going through this.”

There’s precious little information about financial gaslighting in Canada, but research from the Canadian Center for Women’s Empowerment (CCFWE) offers a jarring glimpse into its impact.

It conducted a survey of 121 victims and survivors of economic abuse – where the abuser “is able to gain complete control over the victim’s finances by impeding the ability of the victim to obtain, use, and maintain economic resources” – during the COVID-19 pandemic.

Among other statistics, it found 93% of victims have had their paycheques, financial aid cheques, tax refunds, and disability or other support payments taken away by their abusers. Eighty per cent agreed that during COVID-19, their current/ex-partner displayed more controlling, manipulative, and coercive behaviours pertaining to their finances and economic stability. Another 87% said they’ve had their money stolen from their wallets, purses, or bank accounts.

Financial gaslighting can happen to anyone in a committed relationship, but Shipley-Strickland sees several possible reasons why it’s more likely among women. At her practice, she’s found women tend to be less confident in their numerical skills. She also points to the traditional division between blue jobs and pink jobs, with more women tending to stay at home as men do paid work.

According to Sara McCullough, financial planner and owner of WD Development, it’s common for advisors working with a married client to find that one partner in the relationship handles the “money” side of things. Where it turns into a red flag, however, is when a partner stonewalls the advisor from meeting with their actual client, which can prevent them from working in their client’s interest.

“As an industry, our relationship can often be more with one partner than the other. And that's fine,” McCullough (pictured above, right) says. “But sometimes, we let the relationship take priority over KYC. … There comes a time where that idea of know-your-client really means you have to know your client, not know what your client’s partner says about your client.”

For Shipley-Strickland, one cause for concern is when one partner doesn’t just monopolize meetings, but also takes control of communications. Giving one family email address and not providing a direct email option for the other partner, insisting they don’t need to be involved, is a potentially worrying sign.

“If I can’t have direct communication with one of my clients, that’s not going to work,” she says. “But when you start to get a buildup of these things – if you want to write to Jane you have to go through John, you don’t see Jane at any of the meetings, and you can’t pick up the phone and call Jane – that’s when you have to consider there might be some serious red flags here.”

Another area for consideration is in the granting of trading authority for another person, often a partner, to give buy and sell instructions on an account. McCullough – who is not currently securities-licensed but used to manage accounts for clients for 14 years – knows trading authority is often granted in the client’s best interest. But there’s still a potential grey area.

“I think we as an industry use trading authority in a way that it's not meant to be used,” she says. “To a certain extent, we should respect the relationship; if one person does more than the other with respect to investments, that’s fine. But we still have a responsibility to see the less-involved clients, and press if it’s gone on for too long.”

One way to ward off gaslighting risks, Shipley-Strickland says, is to make sure both parties in the partnership are involved in the conversations. While it doesn’t have to be all the time, seeing both partners involved in the occasional Zoom meeting and/or phone call provides the much-needed reassurance that decisions are being made co-equally.

“Obviously, each partner should be making decisions with respect to their own accounts,” she says. “Sometimes, one partner will take over the conversation, or at least be more engaged because they’re more equipped or interested. But it’s the advisor’s job to create a space for both parties to articulate their financial needs and wants, especially if one person in the relationship is hesitant.

“I think in every partnership, there’s a strong tendency for interests or responsibilities to be divided in some way, shape, or form. While that's being respected, everyone needs a chance for their voice to be heard as well,” she says. “I think it's about finding that delicate balance between those two.”