Two years into the COVID-19 era, financial advisors are on notice that they’re about to be hit with an epidemic of a different sort, and now is the time to prepare.

When the stratospheric increase in at-home drinking between 2019 and 2020 turned the average cul-de-sac kitchen or den into an open bar, the reasons were easily identified: extended lockdowns, kids home from school, working from home, not working at all, parents in assisted living or nursing homes, and social isolation. Many people who were just managing to keep everything above water prior to March 2020 suddenly found themselves drowning.

But surprisingly 2021, a year marked with the relief of vaccination and something of a return to business as usual, might be on a par with last year in terms of private alcohol consumption. What started as a short-term crutch for many people may have turned into a longer-term habit, and financial advisors are finding themselves in the unenviable position of having to wrestle with the knowledge that once substance use turns into substance abuse, the impact on a client’s financial security can be devastating.

“My business has doubled,” said Amanda Koplin, the founder of Koplin Consulting in San Antonio, a nationwide concierge mental health treatment service that works with other professionals—including financial advisors—to connect struggling clients with whatever level of service will help them, from in-home therapy appointments to live-in care. “And most everyone I talk to, their business has doubled, too.”

Prior to the pandemic, Koplin was often a panelist at financial advisor conferences where she educated advisors on how to address the issue of substance abuse with their clients or with clients’ family members.

“I think many advisors know when there’s an issue, and that’s why they’d show up to these presentations,” she said. “My goal was to train them to identify the problem and connect their clients to resources. They don’t have to become the therapist, or the hero, or the savior. They just have to connect their clients to the resources they need.”

Ashley Folkes, a CFP at Bridgeworth Wealth Management in Birmingham, Alabama, described his practice as a highly social one, both in the office and out in the community. Prior to COVID-19, he said he was used to bumping into clients often when out and about.

“I pride myself on building deep, caring relationships with my clients. But with Covid, I’m not seeing them once year,” he said. “It’s happened a few times in my career where a spouse has reached out to me and said, ‘He’s struggling with this.’ But Covid seems to have made it worse.”

After almost two years of spending a lot of time at home, with 24/7 access to alcohol and more privacy than was good for them, potentially more clients would be showing up with signs of overuse, Folkes said, except that very few clients are see him in person now. 

“In the past it would happen where clients come in, their faces are red, they’ve put on fifteen pounds and are a little shaky. But now we're at home, and people can cover it up better,” he said. “Addiction doesn't discriminate, so it doesn’t matter if they’re teachers or nurses or people with $70 million or $80 million in assets. We see it in our industry as a matter of course.”

To Catherine Seeber, vice president and a CFP at CAPTRUST in Lewes, Delaware, and formerly a three-year board member of the Financial Planning Association, servicing clients who are facing the challenge of overuse or addiction should be no different than with any other illness, even though she said she’s seen many an advisor duck the topic with clients completely.

“Specifically now during Covid, advisors should be contacting their clients more frequently anyway. More frequent contact for less amount of time,” she said, in order to keep conversations about goals and health going. “But most advisors don’t take advantage of those conversations to talk about addiction because it makes them uncomfortable.”

That level of discomfort will prevent an advisor from performing their job, she said, as there’s no reasonable way to talk about trusts, powers of attorney, fiduciary appointments, or even advise on portfolio allocation if there is no understanding of the personal and financial costs of addiction that might arise for the client.

So why might advisors be uncomfortable bringing up the topic of dependency and addiction? Koplin explained that one of the most common concerns advisors who seek her input express is that if they bring up the possibility the client may have a dependence on alcohol or drugs, they might lose the client.

“My response is, if your client depletes their wealth, you’re going to lose your client. If your client dies, you’re going to lose your client,” she said. “You need to deal with your client’s financial life. How can this not be part of their financial life? If someone were aging, you’d plan for that. Well, you need to plan for this, too.”

The Data Is Mounting
Back in 2014, the U.S. Census Bureau’s Monthly Retail Trade statistics estimated that total beer, wine and liquor store sales—a reasonable proxy for measuring at-home drinking—tallied around $47.395 billion. That total grew at a fairly steady pace of just under $2 billion per year through 2019, when it reached $56.805 billion.

Then came 2020, the year when Stanley Tucci’s Negroni broke the internet, Zoom happy hours were bottomless and to-go booze cups kept restaurants alive in cities like New York, which until COVID-19 still held an archaic prohibition against drinking in public.

This was the year when beer, wine and liquor store sales jumped the equivalent of six years into the future, landing at $66.852 billion. And it looks like we’re still going strong. For January and February 2021, sales hit $10 billion, compared with the pre-pandemic $8.5 billion of 2020.

Sales aside, 27% of American adults reported binge drinking in April 2020, with binge drinking defined for men as having more than four drinks over a two-hour period, and for women as having more than three, according to “How Has Drinking Behavior Changed During the COVID-19 Pandemic?,” a research paper put out by the Research Triangle Institute. There was increased drug use as well, as 13% of Americans reported starting or increasing substance use as a way of coping with the pandemic, and there was an 18% increase in overdoses compared with the prior year, according to the Centers for Disease Control and Prevention and a national drug overdose reporting system called ODMAP.

Interestingly, the drinking rate among people who already self-identified as having a problem with alcohol barely changed at all—they were already at their maximum capacity, according to the Research Triangle Institute study. The “gains” in heavy drinking have been among people considered more average drinkers.

And during the early stages of the pandemic, who among drinkers began drinking more the most? People with children in the house. The number of drinks per day logged by those with kids increase almost 50% above pre-pandemic levels, while those without kids saw a modest uptick of roughly 10%.

All this free-flowing, at-home drinking, some of which may not have changed at all since March 2020 as many people continue to work from home, may be setting society in general up for a very rude awakening if habits that originated under extraordinary circumstances become the norm through nearly two years of practice in privacy.

“I would be hard pressed to find any advisor who would say they haven’t seen an uptick in substance abuse among their clients,” Seeber said. “And whether it’s the client or the child of a client, everyone is so isolated, not in contact, not talking in person. People feel helpless, feel like there’s nowhere to go.”

With the Delta surge through the fall and early winter, and now the unknowns of Omicron, the gains of normalcy over the summer seem to be receding rather quickly. There’s a new mist of despondency gathering, and despondency can be fertile ground for substance use becoming substance abuse.

On the last day before the public school holiday break in New York City, for example, some schools sent the students home with their remote-learning Chromebooks “just in case,” said one parent, who has been a work-from-home freelancer for 20 years and who said he barely coped the first time his 8-year-old son was connecting to school from his living room. “If my kid goes back to remote learning in January, I’m going to lose my mind.”

Stepping Up, Signs And Solutions
Perhaps because addiction seems so much more personal and intimate than heart disease or cancer, or perhaps because clients themselves are more secretive about it, many advisors with long practices have shied away from being the one to broach the topic in a client meeting.

It was the opportunity of helping his community that motivated Folkes to become an advisor in the first place, he said, and while he said he would address the impact of addiction from a planning perspective, he knows other advisors who would not bring it up with a client.

“Our industry is out there wining and dining as much as any industry. If [advisors] are heavy drinkers themselves, there’s probably not a big chance they’re going to step in,” he said. “They might feel they’re being hypocritical, or will be accused of being hypocritical, especially if they’ve drunk together before.”

But ferreting out dependency or addiction is very much part of risk assessment, and if advisors think they’re staying in their lane by not being ready to address it, they’re dead wrong, Koplin advised.

“Not knowing is issue one. Issue two is knowing but not doing anything about it,” she said. “One in four or five adults struggles with a mental health disorder. That’s a lot of people. And the more open you are about it, the more you build it into your practice, the more you can help.”

Some of the outward signs of a struggle with dependency are fairly obvious, like large chunks of money going out of an account and into a rehab center, or large chunks of money going out and there’s no accounting for it at all.

Other signs are much harder to pinpoint.

“If you don’t actually know what’s going on, a lot of the signs of addiction also could be signs of dementia,” Seeber said, providing a short list of common behaviors that should raise questions:

• Recurring signs of incapacitation, such as falls or accidents.
• Missing calls or scheduled appointments
• Lack of eye-to-eye contact or multiple distractions during a conversation
• Receiving texts or voicemails during unusual hours requesting money
• Hearing story after story in which the facts just don’t add up
• Signs of estranged relationships with a spouse or close family member

To encourage a client to open up, all the sources for this article emphasized the importance of building trust with clients through highly personal service.

“We’re fee only, we don’t sell anything. My goal is to get clients in and never lose them,” Folkes said. “And I’ve had long-term clients where I’ve known their kids, and we’ve talked many times about their kids. Clients where they’ve said ‘If I died and my kid got a million dollars it would kill them because they’d snort it up their nose.’ But if it’s the client who has the problem and they don’t want to talk about it, they can cover things up with just a blink of a thought. It’s hard to explain, but you see it. These are people who would never lie. But they’ll lie about their drinking. And that can ruin generations of a family.”

One of the best ways for advisors to avoid any feelings of conflict around bringing up the topic of addiction is to build it into the relationship with the client from the very beginning, starting with the general questions an advisor would ask in a first meeting anyway, Seeber recommended.

Typical questions in a new client questionnaire might include, “Are there any past or present medical or mental health issues we should budget for right now?” or “Tell me about your living situation and your relationship with other family members.”

But she also suggested direct questions that, if part of new client intake, are less confrontational than if they pop up later seemingly out of the blue, questions like “Have you ever had addiction issues addressed in your estate plan; if not, do you feel it is necessary to think about incorporating these issues?” or “Are there any health or other circumstances affecting whom you contemplate naming as beneficiaries or fiduciaries in your estate planning?”

With the disruption of COVID-19 and its influence on substance abuse, Seeber said she has other questions to ask of all clients in the here and now that can be equally revealing.

“One is, ‘In the scheme of things financial, what makes this year different from 2019.’ Some of those answers might be obvious, like they lost their job or they retired, but your client might raise some concerns that surprise you,” she said. “Another question is, ‘If you go back two years and look forward, are doing what you’d thought you’d be doing?’”

The key in this questioning is to not talk about addiction directly, but to create a safe dynamic where the client can open up that part of a conversation, she said. For parents, a variation on that last question, “What about the people you love? Are they where you thought they’d be two years ago?” can be gut-wrenching, but productive.

Whatever the method a financial advisor uses to broach and discuss addiction, the advisor has to be ready to help. And help does not mean try to fix the problem, but to connect the client to services where a trained professional in that arena can help the client directly. Every community has these services, and a good advisor will figure out the best options in advance.

“You’re not a therapist, you’re not a counselor,” Seeber said. “But you can’t just open the topic with these questions and then leave it there. You really have to have local resources that will be helpful.”

Those resources include the obvious ones, like local mental health and substance abuse assistance, but also a recommendation for an estate attorney who has experience with clients dealing with a substance abuse situation within a family, and even a defense attorney who is familiar with addiction and drug court should that be required at some point.

It’s important that advisors also set the expectation with clients that if the advisor notices any unusual behavior, he or she will reach out to a “trusted contact” chosen at the very first meeting. This should not be a spouse, but someone close to the family, like a best friend or sibling, Seeber said. “The idea of the trusted contact is very important, and it’s the same as with dementia. Who do you call if there’s unusual behavior?”

Similarly, if it seems like a trust is the best way to protect family assets, choosing an outside trustee will create less friction in the family dynamic down the road than appointing someone within the family.

Difficult as it might seem, advisors who incorporate conversations about dependence and addiction professionally and thoroughly will not only display professionalism up front, but will also set the right tone for future conversations should they be needed.

“Some of my clients have come to me through their financial advisor, and from them I hear them say, ‘This person cares about me more than money,’” Koplin said. “And I’ve also heard people say, ‘If I had gotten this kind of help from my financial advisor, it would have strengthened the relationship.’ People across the board want to know their value to you is more than just the money they have.”