Financial planners change their approach when dealing with problem gamblers

By Pamela Yip / The Dallas Morning News <br><br>When financial planner Doyle Brown works with clients, he wants them to be informed as much as possible about their assets and to be involved in planning

Monday, October 16th 2000, 12:00 am

By: News On 6

By Pamela Yip / The Dallas Morning News

When financial planner Doyle Brown works with clients, he wants them to be informed as much as possible about their assets and to be involved in planning to build wealth.

He can't take that approach with one client. For her, it's best not to show her the money.

That's because she's literally rolling the dice with her financial future.

"When her husband passed away, she went through $175,000 in inheritances in about a year and a half, most of it through gambling," said Mr. Brown, a certified financial planner at Comprehensive Planners of Nevada Inc. in Reno.

"It's very common for people in Nevada to have a gambling problem," he said. "I have seen maybe four or five people who have had a gambling problem."

Twenty-five years ago, legalized gambling was rare â€“ confined to Nevada and Atlantic City, a few racetracks and two or three state lotteries.

Today, some form of gambling is legal in 47 states, including Texas, according to the National Council on Problem Gambling. And it's becoming more widespread.

"As legalized gambling becomes increasingly common in our society, problem gambling and its attendant financial nightmares also will become more common," according to Helping the Problem Gambling Client, a booklet published by the National Endowment for Financial Education and the National Council on Problem Gambling.

The booklet is one of three for financial planners and families of problem gamblers. It focuses on the financial issues surrounding problem gambling and is made available to gamblers support organizations and professionals who treat problem gamblers.

While there's no surge of financial planning clients with gambling problems, it is something that planners need to be aware of, said Brent A. Neiser, director of collaborative programs for the Englewood, Colo.-based endowment, which provides personal finance education to consumers.

"It's a simmering problem," he said. "There's nothing that says people have to get to it now, but it's a fact that many people have this problem."

About 1 percent of the U.S. population are what's called "pathological gamblers," compulsive gamblers with a disorder akin to substance dependence, said Sue Cox, executive director of the Texas Council on Problem and Compulsive Gambling.

About 2 percent of the U.S. population are "problem gamblers," which Ms. Cox defines as someone whose gambling is "at a level that presents any kind of problem for a gambler."

Ease of gambling

What exacerbates the problem is how easy it is to gamble these days, experts said.

For the first time, Virtgame.com Inc. in San Diego, an online gambling system, has received the go-ahead from the Nevada Gaming Control Board to distribute sports wagers on the Web.

Nevada residents will be able to legally place bets 24 hours a day on football games, horse races and other sports on Web sites operated by Coast Resorts Inc.

And on Nov. 7, Arkansas residents will vote on a proposal to legalize casino gambling.

In Texas, gamblers can choose from several venues, including the state lottery, horse racing and dog racing.

"Because gambling is starting to spread out with Indian gaming, the state with their lotteries, the riverboat gambling â€“ the pervasiveness of it â€“ the availability of Internet gambling, I think the number of people who can succumb to the gambling fever will increase," Mr. Brown said.

Financial planners can play a crucial role in heading off financial disaster, experts said.

"The main substance that problem gamblers use is money, and if anybody is going to pick that up, a financial planner may be in a position to do so," said Keith Whyte, executive director of the National Council on Problem Gambling in Washington, D.C.

But they have to know what red flags to watch out for.

Reading the signs

Mr. Brown said he started wondering about his client after she began giving odd reasons for wanting to withdraw money from her investment accounts.

"The reasons that she started taking the money out became stranger and stranger," he said. "One reason she said she wanted to take money out was to put in a porch â€“ but she lived in an apartment."

The jig was up for his client after he received Internal Revenue Service statements listing her gambling winnings. "At that point, the cat was out of the bag," Mr. Brown said.

Chris Cooper, a certified financial planner at Chris Cooper & Co. in Toledo, Ohio, had a client who ran up $40,000 in credit card bills buying lottery tickets. His family income was only about $25,000 a year.

He didn't want his wife to know about his problem, so he tried to withdraw his pension benefits to repay the debt.

That's when Mr. Cooper put his foot down and had him declare bankruptcy.

That's not the best solution for a problem gambler, said Ms. Cox of the Texas council.

"It is often recommended that they do not declare bankruptcy because that is considered just another bailout, and after the bankruptcy, the gambler often returns to gambling," she said.

Instead, she said that gamblers should be forced to repay their debts.

"It is important that they make restitution and feel that pain over a long period of time," she said. "Feeling that pain can prevent the gambler from returning to the gambling activity."

The differing opinions over having a problem gambler declare bankruptcy highlight a key point for financial planners: Dealing with a client who's a problem gambler may call for strategies that are counter to traditional planning principles.

"Everything that a financial planner has to do with a gambler in order to make the plan work is contrary to everything we do with other types of financial planning," said Sandra Stone, a certified financial planner in Boca Raton, Fla., who has clients with gambling problems.

For example, financial planning works best when clients are involved in decision-making and are fully aware of where their assets sit.

"With a gambler, the decision-making and the day-to-day knowledge of their assets and investments should be separated from them," Ms. Stone said.

"The gambler has to delegate the money management to somebody else."

Family help

It's crucial for planners to get families of problem gamblers involved in the finances, experts said.

That's what Mr. Brown is trying to do with his elderly client. But she has yet to give him permission to contact her family.

"I'm saying, 'I don't want you to be able to access this money to pay for gambling debts. I'd like to involve your family,'" he said. "This is threatening to her."

Mr. Brown wants to place his client's assets in a trust, which is a legal entity that holds title to assets and property for the benefit of another person or persons.

One of the woman's children would serve as the trustee and administer the trust, handling such duties as record-keeping, distribution of assets and paying taxes.

While planners may see their clients as fiscally self-disciplined because they're seeking out their services, the gambling demon could strike later in life, Mr. Cooper said.

"You might have someone who is young and who has never been a gambler and becomes one when they're 65," he said.

So planners must be more attuned to problem gambling, experts said.

"It's a closet situation and that's one of the reasons a lot of planners don't see it," said Kim Dignum, a certified financial planner.