Advisors Can Help Recovering Addicts Restore Financial Steadiness

This article will address the uncomfortable topic of addiction and with that, a couple of quick housekeeping items.

First, by no means should registered investment advisors (RIAs) be in the business of addiction counseling and related endeavors. An advisor’s heart is probably in the right place, but going down this road could lead to negative legal ramifications. Second, and I only mention this because the world is full of Doubting Thomases, I was once married to an alcoholic. I’ve seen firsthand the toll addiction can take on a relationship and finances.

The related statistics are staggering. A 2023 poll by the Kaiser Family Foundation indicated 19% of respondents admitted to struggling with addiction and two-thirds said they or someone in their family has struggled with substance abuse or overdosed.

Again, advisors shouldn’t get involved with the clinical aspects of clients and families dealing addiction, but they can be of assistance to helping those in recovery shore up their finances.

Those In Recovery Need Advisors

When it comes to clients that are in recovery and adding new business from that demographic, advisors should keep open minds. If for no other reason than that addiction afflicts people of all economic backgrounds. It does not play favorites based on income.

With that in mind, advisors can be forces for good among clients that are in recovery because those folks are likely facing an array of financial difficulties. Consider this: the “average” 30-day in-patient treatment program can cost $14,000 to $27,000 and in many cases, such a visit isn’t covered by insurance.

“Substance abuse can ravage personal finances, leaving individuals in deep debt, with poor credit, legal issues, and strained professional standing,” notes Nationwide. “Financial professionals need to understand the broader context in which their clients operate.”

Interestingly, there are some financial issues that likely stem from addiction with which advisor can assist clients in recovery. Those include the insistence of a client in recovery that they’re ready to be financially independent on a timeline that isn’t credible and compulsive spending habits.

The unfortunate reality with substance addiction is that it can breed other addictive or compulsive behavior – some of which come with dire financial consequences. Think spending too much on Amazon, frequent casino trips or even allocating too much money to highly speculative investments.

“Clients may exhibit signs of compulsive buying. By addressing these behaviors early and establishing accountability, you can mitigate impulsive financial decisions that could jeopardize recovery,” adds Nationwide.

Customization Matters

Advisors are already engaging in some level of customization for other clients and that sentiment should extend to those in recovery. Those clients are likely to appreciate the structure and the added attention/care.

Issues where customization is highly relevant to clients in recovery include budgeting, debt management and rebuilding credit, among others.

High-interest loans, unpaid bills, or even financial obligations arising from addiction-related crises require meticulous attention and strategies that prioritize their repayment of ‘bad debt,’” concludes Nationwide. “A good credit score can significantly improve financial opportunities. For those who’ve faced financial hardship during addiction, repairing credit is a foundational step.”

Related: Tips for Advisors Considering Model Portfolios