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 self- determination 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 overarching 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, in 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.”

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