Not Waiting for an Emergency

At BMO, François Martel, Regional Vice President of Financial Planning for Quebec, Eastern Ontario, and the Atlantic region, notes that clients rarely raise this issue with their advisor until they receive bad news. "It is often in the shock of a diagnosis that reality hits them," he laments. "I believe advisors should discuss this with them early enough to initiate planning."

For him, the first element to put on the radar of aging clients is the importance of discussing it with their loved ones. "Elderly people often assume that their children will take care of them, but sometimes children do not want or cannot assume this role."

Designating a person to oversee certain responsibilities, including financial management, can also create resentment or worry among other family members. "The ideal is to lay all the cards on the table, ask the intended person if they accept the role we want to assign them, and explain your decisions to the entire family," suggests François Martel.

Anticipating Costs

Since the advisor's role primarily revolves around the client's finances and financial protection, they must plan for a potential loss of autonomy and the use of a caregiver.

"Financial planning plays an essential role in this regard," says Simon Brochu, Senior Wealth Management Advisor and Financial Planner at Desjardins. "Financial products and savings amounts can be adjusted to meet specific needs, such as compensating or remunerating a caregiver."

There are no specific financial products to pay a "natural" caregiver. Therefore, individuals will generally use traditional means such as bank transfers, automated or non-automated, checks, or cash. They can also open an account dedicated to this expense, similar to any other savings goal. Certain insurance coverages (critical illness, loss of autonomy, etc.) can help cover these costs.

Advisors can also explore certain government measures. Employment Insurance offers benefits for natural caregivers that can cover up to 55% of the caregiver's remuneration, up to a maximum of $650 per week, under certain conditions and for a limited time. The governments of Quebec and Canada offer a tax credit for caregivers.

Ensuring Proper Support for the Caregiver Relationship

When a client experiences a loss of autonomy, the natural caregiver may acquire varying degrees of power regarding the client's finances.

"Advisors have a strong interest in encouraging their clients to obtain the basic documents that clarify these situations to avoid complications," says Simon Brochu.

For example, a client can grant a power of attorney to a natural caregiver who is not their spouse, enabling them to carry out only certain transactions, such as paying bills online or using an ATM card for grocery shopping. The client remains responsible for their assets and transactions carried out in their accounts. The caregiver granted power of attorney must act in the best interest of their charge, but financial institutions have no obligation to do business with this person and can refuse service if they suspect financial abuse, for instance.

Clients can also sign a broader legal power of attorney, which can include the management of all their assets. The client should also establish a mandate of protection, designating the person or persons who will take care of them and their assets in case of issues. Once declared incapable, a person no longer has the right to sign a power of attorney or a mandate of protection.

Article 19 of the Code of Ethics of the CSF specifies that a representative "may not carry out any transaction, agreement, or contract whatsoever with a client who is manifestly unable to manage their affairs unless the decisions made to carry out these transactions, agreements, or contracts are made by individuals who can legally decide on behalf of the client." Hence the importance of planning these provisions early enough.

New Tools

Other tools can also facilitate the role of a natural caregiver in managing the finances of the person they are assisting, such as the concept of a "trusted person." Since 2021, Article 13.2 of Regulation 31-103 of the Securities Act requires registered individuals to take "reasonable measures to obtain from the client the name and contact information of a trusted person and their written consent to communicate with them." This amendment helps advisors resolve the dilemma between respecting client confidentiality and the desire to report vulnerability or potential abuse.

"We now employ this approach at Desjardins to have a contact person to reach out to for verifying certain information or discussing a problematic situation," explains Simon Brochu. "Even before, we used 'reference persons' with certain clients."

The trusted person has no rights or decision-making power concerning the client's assets. They are merely a contact person with whom the advisor can communicate.

The measure of assistance, recently created by the Public Curator, goes a step further. It allows a client to officially appoint someone to assist them in certain decision-making or asset management aspects, without relinquishing any of their rights. The assistant may also have access to the client's confidential information with their consent. The assistant is designated after a verification and interview process conducted by the Public Curator.

Since this measure is not yet well-known, advisors should not hesitate to introduce it to some of their clients.

Protecting the Client's Interests

In all of this, the advisor must also set certain boundaries to protect themselves. "The most important thing is always to keep in mind that your role is to serve the interests of your client," emphasizes Geneviève Beauvais, a lawyer specializing in professional development and practice quality at the CSF.

In certain situations, this can become complicated. "The challenge for advisors is to know how to maintain harmony between certain client desires and their financial interests," adds Ms. Beauvais. For example, an elderly person wants to give a large sum of money to their caregiver, jeopardizing the planning that ensured they would have enough money for their later years. Is it really a change in their will, or is there a risk of abuse? Does this new direction respect the client's best interest?

"We must not forget that the client remains capable as long as they have not been declared legally incapable, so they have the right to make the decisions they wish, but some of these decisions may not meet suitability obligations," Ms. Beauvais points out.

She suggests that advisors carefully document these situations — to be able to demonstrate that they have fulfilled their obligations — and send a summary to the client, by mail or email, detailing what was discussed during the meeting. She also proposes buying time, for example, by offering to discuss it at a later meeting, perhaps in the presence of a trusted person or a colleague of the advisor. Though it should be noted that the client can ultimately refuse this request.

Long-time clients of an advisor or family members whose assets are managed by the advisor may sometimes as them to serve as a trusted person, assistant, or even a mandatary. This is a situation to be avoided. "There is a risk of conflicts of interest, which could place a member of the CSF in violation," notes Ms. Beauvais.

Since 2021, Regulation 31-103 of the Autorité des marchés financiers is more flexible and allows certain professionals to place themselves in a conflict of interest situation when dealing with the affairs of a parent or child. However, this provision of the securities sector does not apply to insurance professionals.

Article 26 of the Code of Ethics of the CSF also states that a representative "may not carry out any transaction, agreement, or contract whatsoever as a representative with a client for whom they are a tutor, curator, or advisor as defined in the Civil Code." Therefore, a CSF member practicing in both disciplines could find themselves in a precarious situation. Prudence is still required.