One of the more interesting aspects of working in professional standards is when an adviser calls you and says, “Can I ask you a question that is of an ethical nature?”
Recently an adviser phoned me to ask my opinion. He opened the discussion by saying, “I bet you have never been asked a question like this before”.
The adviser and his business partner had been debating the best way to approach this matter. However, they could not agree.
The background
A few years ago a client received a lump sum compensation payment after he was paralysed as a result of an accident. The client had spent a lot of the compensation payment modifying his home and also commenced a relationship where he was supporting his new partner and her children.
The adviser had a number of concerns regarding this client, including members of his family taking advantage of him. The adviser had always made detailed file notes about his discussions with this client and verbally expressed a concern to me that one day when the client runs out of money; the client may try to lodge a claim against him.
The first dilemma
The adviser had a genuine concern for his client given his vulnerability and the fact that the client was in need of good-quality financial advice. The rate at which the client was spending money and failing to follow his advice meant it would come to a point where the relationship would become unsustainable.
The adviser had previously considered whether he should end the relationship with the client, given the client never seemed to take his budgeting advice or control his spending. The adviser decided he was not going to sack this client just because the client may be in a position where he could no longer afford to pay his fees.
The second dilemma
The second dilemma was proving a little more challenging.
During the last review, the adviser had discussed the client’s budget and where he was spending his money. The adviser pointed out that over the last three months the client had consistently spent $400 more than was agreed as part of a budget plan.
When the adviser asked the client why this was taking place and where he was spending his money, he told him that he was spending $400 a month on marijuana. The client explained that he used marijuana to help him cope with pain relief as a result of his accident.
I confirmed I had never had a question like this and I asked him what he said to the client when the client told him the truth about his spending habits.
The adviser was a little apprehensive, so to break the ice I jokingly suggested, “You did tell him it would be cheaper to grow his own or move to South Australia?” Fortunately, he saw the funny side of my comment and confirmed that the thought had crossed his mind; however, he was not going to suggest to a client that he go out and break the law. The adviser had told the client he was going to have to find another way to deal with his pain and left it at that.
The third dilemma
The discussion then returned to the issue of how the adviser should file-note this discussion, as this was what he and his business partner could not agree upon. I confirmed a file note should be a truthful recollection of what was discussed and he should include the overspending and the drug use. The adviser was a little reluctant to do this and I suggested if the client did lodge a claim, it may be all that he can rely upon to defend himself. He eventually decided he would include reference to the drug use.
The fourth dilemma
Before we ended the call I pointed out that this created another problem.
Now that he knew the client was regularly using drugs, he was going to have to satisfy himself that the client was not under the influence of drugs when he gave him advice. I suggested he ask the client if he was under the influence of drugs and make a file note of the answer; I also suggested he make file notes about the client’s physical appearance.
Help with ethical dilemmas
Ethical dilemmas, particularly one such as this, obviously involve areas that will make some people uncomfortable and not everyone will want to discuss them openly; however, they require consideration. As a starting point, if you need to discuss an ethical dilemma, and you are a member of a professional association, you could speak to them.
I thank the adviser for agreeing to let me share this story.
