Compulsive gamblers complicate a
planner's job, as well as their families' lives.
Financial advisors are trained in helping people
devise rational plans for their money. But what is an advisor to do
when a client starts managing their money irrationally-by gambling it
Mark LaSpisa is one advisor who has had to grapple with that question. He had a client in the cement business who, during his firm's slow winter period, relieved his boredom by visiting riverboat casinos near his Chicago home. It turned into a bad habit: He would consistently lose $500 to $1,500 per visit, two to three times a week.
LaSpisa became aware of the situation through the man's wife, who called LaSpisa one day and begged him to talk to her husband, which he did. The answer he came up with, and which seems to have worked thus far, is to suggest ways for the client to eliminate his boredom in other ways. Instead of visiting riverboat casinos, the client has taken up golf.
The new hobby-along with a $100,000 bailout from his mother-in-law-defused the crisis. "I haven't seen too many Gambling 101 courses for planners, but I will say that, as a planner, you are experienced in dealing with conflict," says LaSpisa, managing advisor at Vermillion Financial Advisors in South Barrington, Ill. "Any time you're dealing with people's finances, you are dealing with private issues."
Although a commonsense approach may work some of the time, experts in compulsive gambling say that it may be worthwhile for financial advisors to prepare themselves for dealing with clients who are gambling addicts-or who exhibit other types of compulsive behavior that impacts their pocketbook.
Addictive gambling is not widespread. Experts say that only about 4% to 6% of the adult population will have a gambling problem in their lifetimes. Yet those who deal with compulsive gamblers say recent trends may make it more likely to see cases land on an advisor's doorstep. More women are taking up the habit, they note, as are an increasing number of college-age adults. They also point out that the population of senior citizens-one of the target demographics of gambling enterprises-continues to swell with the aging of the baby boom generation.
Easy access to credit cards also is feeding the gambling habit of many addicts, who often are people with easy access to cash and the ability to gamble any time of the day, including college students, self-employed workers and retirees, says Marlene Warner, program director for the Massachusetts Council on Compulsive Gambling.
"Studies will tell you there are higher rates of problems with kids in college and elderly adults over 65," Warner says.
The Massachusetts Council on Compulsive Gambling is now engaged in a project that is attempting to bring financial advisors into the help network for gambling addicts. The organization won a $30,000 grant from the Certified Financial Planner Board of Standards last year to create a curriculum that helps financial advisors deal with the issue.
The focus of the training, however, is not on the gamblers themselves. Instead, the curriculum is aimed at helping advisors work with a gambling addict's loved ones. The program is also focused on preventative education for young adults, and is providing relatives with free face-to-face consultations with financial advisors, Warner says.
The reason the program is structured this way is that it's usually not the gamblers but the gambler's spouse or relatives who call the organization's hotline seeking help. Calling compulsive gambling an "invisible and hidden addiction," Warner says the calls usually come after the gambling problem has resulted in a family financial crisis.
"Oftentimes the family members call us distraught," she says. "It's not uncommon to hear from the wife saying she just got a call from the bank and their house is being foreclosed."
Lauren Gradowski, an advisor who helped the Massachusetts Council with some of its initial work on the project, says advisors need to be aware that deception-by both the gambler and his loved ones-is usually a part of any situation that involves a compulsive gambler. Gradowski's first experience with a gambler in her own practice was when she discovered one of her clients would not be able to retire on time because he had given up to $30,000 to his brother over a long period of time to pay off his gambling debts.
In another instance-"the one that upset me the most," Gradowski says-a husband accused his wife of misusing the family's funds after they were unable to keep up with their bills. However, after Gradowski studied their weekly cash flow, she discovered that $400 per month was unaccounted for. With a little more digging, she found out the husband was making monthly ATM withdrawals to feed his gambling habit.
In these, and other cases, Gradowski ended up working with those impacted by the gambler, rather than the gambler. "I have very few incidents where the gambler comes in and says they have a problem," says Gradowski, who is director of financial planning with Personal Financial Advisors in Covington, La.
Noting that an advisor shouldn't try to act as a therapist with gamblers, Gradowski says advisors should make clients aware of the resources available in their area for treating compulsive gamblers. Some of the national services include: the National Council on Problem Gambling, which offers a list of its state affiliates and a therapy referral tool at its Web site, www.ncpgambling.org; Gamblers Anonymous, at www.gamblersanonymous.org; and Gam-Anon, at www.gam-anon.org. Gradowski also notes that states with legalized gambling are required by law to provide a gambling assistance service.
Advisors may need to change some of their thinking when working with the families of compulsive gamblers, those involved with the issue say. While an advisor is probably used to collecting all of a family's financial information before working out a plan, it's often the case that relatives are hiding funds from a gambler, says Jennifer Lane, owner of Compass Planning Associates in Boston. The firm is working with the Massachusetts Council on its financial advisor curriculum project, including helping relatives on a pro bono basis.
"In the gambling situation, you are often asked to solve a particular problem and are only given part of the entire picture," she says. "You have to respect that."
Advisors also need to avoid swift and easy solutions, or the declaration of bankruptcy, to address the debt problems a gambler has created, she says. It's therapeutic for the gambler to drag out the repayment process. This can sometimes be accomplished with a monthly repayment schedule with low monthly payments. "With a gambler, you need to set up a repayment plan where the gambler feels the process of paying the debt back," she says.
Lane says that her work with the council has also trained her to look out for the warning signs of a gambling problem when dealing with clients. "A lot of debt is going to raise flags," she says. Lane also likes to ask clients what they like to do for fun-an indirect way to find out if they like to gamble.
Chris Cooper, owner of the Chris Cooper & Co. financial advisory firm in Toledo, Ohio, and San Diego, says he's dealt with enough situations involving gamblers that he has a list of therapists in his area who specialize in dealing with the issue. He views gambling as one of several types of compulsive behaviors that advisors need to recognize and help a client address.
These can include clients who compulsively shop for things they don't need, men who throw money at women in a desperate attempt to win their love and clients who compulsively trade in and out of investments.
"From a financial advisor's point of view, they all fall together as compulsive behavior," he says. "We are kind of like social workers, but without the background to deal with this."
Among his recent cases was a client who called to seek help because his son racked up $40,000 in gambling debts while in college, and another client who came to him after investing $1.7 million of his savings into Vanguard mutual funds and losing 85% of it through daily trading. Cooper unsuccessfully attempted to get the man into counseling.
"When you looked at the guy, you could see he was obsessed," Cooper says. "He hadn't shaved, his hair was dirty, he was all disheveled-he looked like a gambler."
Five Questions For Advisors To Consider
1. Is your client secretive about money and money issues?
2. Does your client have a shortage of cash, despite making an adequate income?
3. Is your client borrowing heavily from his or her family members and friends?
4. Is your client dipping into home equity, investments and retirement accounts to get cash?
5. Is your client expressing that they are spending a lot of time and/or money gambling?
Source: Massachusetts Council on Compulsive Gambling