As a growing number of Canadians slip into debt, you’ll likely find yourself having more frequent conversations with clients about debt and how to bring it under control.

“Sliding into debt is, unfortunately, very easy,” says Tracey Greenwood, division director, Investors Group Inc. in Kingston, Ont., “and we do come across it quite often when we sit down and meet with new clients or new prospects.”

Statistics Canada reports that in the fourth quarter of 2012, Canadian household debt (credit cards, loans and mortgages) was 165% of disposable income. Overall, the level of Canadian household debt increased on an annual basis by 5.5% in 2012.

To gauge whether clients may be in over their heads, experts suggest watching for such signs as static or rising debt levels from one review to the next, cash flows heavily concentrated on paying off yesterday’s purchases and clients asking to cash in investments early.

When some or all of these red flags are evident, getting the debt conversation started could take some tact on your behalf. Start out by reminding clients that everything they tell you is confidential, and that you are there to help – not judge, says Laurie Campbell, CEO, Credit Canada Debt Solutions in Toronto.

One way to do that is to structure the meeting as an open conversation, without any pressure to make a decision. “If an individual feels that,” Campbell says, “they are more likely to be open so that they don’t feel that they’re going to be put in a corner or feel like they’ve done something wrong.”

As well, if clients seem reluctant to talk about their debt problems, let them know that they’re not the only ones. Tell clients that you’ve dealt with other people in similar situations, says Greenwood, and that it is part of your role, as a financial advisor, to help get their debt under control.

Finally, begin to address the specific ways that this debt could derail their financial plans. It may take a few meetings, says Marc Lamontagne, a certified financial planner and partner at Ryan Lamontagne in Ottawa, but eventually clients have to address different options for paying off their debt. This could include such difficult decisions as selling their home and moving into an apartment.

Those decisions need to be integrated into the client’s overall financial plan, part of which is a detailed budget. You and your client should follow up on the financial plan on a regular basis.

“If the follow-up isn’t in place then it’s really easy to slide back into old habits,” says Greenwood. At first, check in with clients on a monthly basis, she suggests. Once things are under control, the meetings can take place on a quarterly and then annual or semi-annual basis.

However, if clients persist in their indebted ways, conversations may need to take a sterner tone.

“Every once in awhile, I’ll see somebody that just needs a good yelling at,” says Lamontagne. “Unless you make it really serious and say, ‘you’ve got to change or there’s going to be real consequences,’ I don’t think they’re going to get it.”

This is the first article in a three-part series on debt.

Wednesday: helping sandwich generation clients manage debt.