Tak­ing aim at ca­pac­ity

Investment Executive - - FRONT PAGE - BY DONALEE MOUL­TON

nova sco­tia has in­tro­duced new leg­is­la­tion that will make rec­og­niz­ing the au­ton­omy and in­de­pen­dence of adults with di­min­ished ca­pac­ity eas­ier. The new law, not yet in force, also may make serv­ing these clients more dif­fi­cult for fi­nan­cial ad­vi­sors in the prov­ince and her­alds what lies ahead for ad­vi­sors across Canada.

The pro­posed leg­is­la­tion — re­flec­tive of a na­tional trend to re­gard “ca­pac­ity” as

a spec­trum and a per­son’s self­de­ter­mi­na­tion as a right — is in­tended to en­sure there is a bal­ance be­tween in­di­vid­u­als’ right to both in­de­pen­dence and pro­tec­tion.

“The act will do two things,” says Mark Furey, the prov­ince’s at­tor­ney gen­eral and min­is­ter of jus­tice, who an­nounced the pro­posed Adult Ca­pac­ity and De­ci­sion Mak­ing Act ear­lier this month. “It will pro­mote peo­ple’s right to dig­nity and au­ton­omy, and it will work to pro­tect their phys­i­cal well-be­ing and fi­nan­cial in­ter­ests when needed.”

There’s wide­spread agree­ment among ex­perts that com­pe­tency is not an all or noth­ing is­sue, as is cur­rently the case with Nova Sco­tia’s ex­ist­ing In­com­pe­tent Per­sons Act. “Peo­ple have dif­fer­ent ca­pac­i­ties,” says Jeanne Desveaux, a lawyer in a Hal­i­fax sub­urb who is an ex­pert on ca­pac­ity is­sues. “Some peo­ple are able to man­age their money, but they can’t make med­i­cal de­ci­sions. Some can de­cide where to live, but can’t han­dle a bank ac­count.”

Al­though the pro­posed act will rec­og­nize this, Desveaux be­lieves the act doesn’t of­fer in­di­vid­u­als the full pro­tec­tion they may need. She has three main con­cerns:

In­di­vid­u­als may be given the free­dom, in­clud­ing the fi­nan­cial free­dom, to act in ways that may not be in their best in­ter­ests.

Rep­re­sen­ta­tives ap­pointed by the court in cases in which ca­pac­ity is com­pro­mised may not be eth­i­cal or in­formed.

Ev­ery change to an in­di­vid­ual’s care plan re­quires a trip to court.

“Fi­nan­cial ad­vi­sors will be chal­lenged to deal with this leg­is­la­tion,” says Desveaux.

The is­sue ex­tends be­yond Nova Sco­tia. As Canada’s pop­u­la­tion of se­niors con­tin­ues to rise rapidly — the baby boomer co­hort be­gan turn­ing 70 last year — ad­vi­sors will be called upon more and more of­ten to in­clude an as­sess­ment of clients’ men­tal ca­pac­ity to make fi­nan­cial de­ci­sions as part of due dili­gence. This is ex­cep­tion­ally dif­fi­cult to do, notes Ellen Bess­ner, part­ner with Babin Bess­ner Spry LLP in Toronto and a mem­ber of the On­tario Se­cu­ri­ties Com­mis­sion’s Se­niors Ex­pert Ad­vi­sory Com­mit­tee.

“The prob­lem is that [symp­toms of ] many dis­eases, such as Alzheimer’s, come and go,” she says. “One minute, clients may present them­selves as fine; the next minute, not. The sit­u­a­tion is im­pos­si­ble for ad­vi­sors to nav­i­gate, and be­yond their ex­per­tise.”

Desveaux rec­om­mends that ad­vi­sors get ahead of the prob­lem by pre­par­ing in ad­vance for po­ten­tially un­com­fort­able con­ver­sa­tions with clients and their fam­i­lies. “When you have [a client] be­fore you,” she says, “you get them to prove they are com­pe­tent. Ask the re­ally tough ques­tions, and let clients know this [ex­er­cise] is in their best in­ter­ests.”

One of the tough ques­tions Desveaux asks her clients is that they share a list of their med­i­ca­tions. As well, she re­quests that clients come to ap­point­ments at dif­fer­ent times of the day, an in­for­mal way to as­sess their abil­ity to process new in­for­ma­tion. Bess­ner rec­om­mends ad­vi­sors re­quest that clients pro­vide a let­ter stat­ing that, if there are con­cerns with ca­pac­ity or other is­sues in the fu­ture, the ad­vi­sor has the right to con­tact an in­di­vid­ual named in the let­ter.

“But you can’t dis­cuss any fi­nan­cial in­for­ma­tion [with that in­di­vid­ual],” she cau­tions. “That’s con­fi­den­tial. You need a prop­erly ex­e­cuted power of at­tor­ney for that.”

Long-term re­la­tion­ships with clients give you an edge in these types of sit­u­a­tions. “Know­ing the client is crit­i­cal,” says Emily Rae, se­nior fi­nan­cial plan­ning ad­vi­sor with As­sante Wealth Man­age­ment (Canada) Ltd. in Hal­i­fax. Thus, it’s eas­ier if you’ve had a client for 20 years when at­tempt­ing to iden­tify changes in be­hav­iour, such as spend­ing more money than usual.

Rae also points out that you are not re­quired to do ev­ery­thing a client asks. “If a client wants to do some­thing im­pru­dent, as ad­vi­sors, we have the abil­ity to say no to things.” Ad­vi­sors, she adds, can be held re­spon­si­ble in sit­u­a­tions in which in­ap­pro­pri­ate ex­pen­di­tures, sales or other trans­ac­tions were im­ple­mented on be­half of clients later found not to be com­pe­tent.

An open mind is es­sen­tial to en­sur­ing that red flags are rec­og­nized and that the right ques­tions are asked of clients, says Desveaux: “Don’t as­sume that be­cause some­one is 45 and wear­ing a suit that he or she is cog­ni­tively in­tact. We can’t judge peo­ple.”

Ul­ti­mately, though, when ques­tions of com­pe­tency arise, tak­ing the is­sue to an­other set of eyes may be the safest course of ac­tion. Says Bess­ner: “At the mo­ment, all that ad­vi­sors can do is es­ca­late the is­sue to their com­pli­ance team.”

The ove ra rc hing theme of Nova Sco­tia’s pro­posed leg­is­la­tion is that ev­ery adult has the abil­ity to make de­ci­sions un­less proven oth­er­wise, and any de­ci­sions made on an adult’s be­half will re­flect the least in­tru­sive, least re­stric­tive course of ac­tion pos­si­ble.

Un­der the pro­posed Adult Ca­pac­ity and De­ci­sion Mak­ing Act, ex­pected to pass this au­tumn, rep­re­sen­ta­tives of adults with di­min­ished ca­pac­ity have clearly de­fined du­ties, in­clud­ing en­cour­ag­ing the adult to take part in de­ci­sions as much as is rea­son­able and con­sid­er­ing the adult’s prior in­struc­tions, wishes, val­ues and be­liefs when mak­ing any de­ci­sions, in­clud­ing fi­nan­cial de­ci­sions.

This de­parts from Nova Sco­tia’s cur­rent leg­is­la­tion, struck down by the Supreme Court of Nova Sco­tia last year as un­con­sti­tu­tional. In a land­mark legal chal­lenge, Lan­don Webb, then a 25-year-old fa­ther, con­tended that the prov­ince’s ex­ist­ing law vi­o­lated his rights un­der Canada’s Char­ter of Rights and Free­doms.

In 2010, Webb was de­clared legally in­com­pe­tent af­ter his par­ents pe­ti­tioned the court, as­sert­ing that their son was con­sort­ing with crim­i­nals and needed pro­tec­tion. Webb’s par­ents, who were rep­re­sented by Desveaux, ar­gued that their son has the in­tel­lec­tual ca­pac­ity of a 10- or 12-year-old; Webb sought to live in­de­pen­dently.

Un­der Nova Sco­tia’s cur­rent leg­is­la­tion, once a guardian is ap­pointed, he or she has full con­trol over the in­di­vid­ual’s life. And de­spite these sweep­ing pow­ers, the law places no ex­plicit re­spon­si­bil­i­ties on guardians in­volv­ing care for the in­di­vid­ual. The cur­rent leg­is­la­tion also con­tains no process for chal­leng­ing the le­gal­ity of a guardian’s de­ci­sion. There’s also no re­quire­ment for a manda­tory re­view of the find­ing of in­com­pe­tence, which cur­rently re­quires af­fi­davits from two physi­cians, who don’t have to ap­pear in court.

The pro­posed leg­is­la­tion at­tempts to ad­dress these con­cerns. Desveaux fears it will fail. Re­quire­ments un­der the pro­posed leg­is­la­tion are likely to re­quire more re­sources, i n both time and money, for in­di­vid­u­als and their fam­i­lies.

“The sup­ports [needed] are not there now,” she says. “What makes [the gov­ern­ment] think they will be there un­der the new leg­is­la­tion? The new leg­is­la­tion will cause a big­ger prob­lem.”

“This is an im­pos­si­ble sit­u­a­tion for ad­vi­sors to nav­i­gate”

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