Are You Prepared to Guide Your Clients Through Life-Changing Events?
It’s going to happen. You can count on it. I’ve written in the past why it’s critical for advisors always to be prepared for ‘what ifs,’ particularly as it relates to a stock market crisis. That’s when your clients need you most. Having a plan of action to help your clients through difficult times is essential if you expect to maintain their trust and confidence. But what about other crises—the unexpected, life-changing kind that can engulf your clients personally, like a divorce or the death of a spouse or child. Are you prepared with a plan of action to help your clients through the most challenging times of their lives?
Life-changing events come out of nowhere, and many can have both an emotional and financial grip on your clients. Helping your clients navigate between the two is not only essential, but it’s also a role only a financial advisor can play. You have an intimate knowledge of their financial circumstances and, if you’ve done your job properly, personal insight into their dreams and ambitions for themselves and their families. During difficult times, you become one of the more important people in their lives.
You never want to get caught flat-footed when the unexpected happens to your clients. You need a plan of action for whatever may come your way. When you take a lead role in guiding your clients through their crisis, they will not only appreciate it, but they will forever look to you as their most trusted advisor.
Many scenarios can come up in your clients’ lives, but you can start by planning for three of the more common ones:
There’s a 50 percent chance any one of your clients’ marriages could end in divorce. That’s an unfortunate fact. When the time comes, you’ll need a plan to help your client through the process and then help them reset their finances post-divorce.
The tricky part is determining if you will work with both spouses as a couple, separately, or with just one spouse. If you work with both spouses, it’s essential to assure them you will remain open and impartial in discussing financial planning matters with both.
Whichever is the case, you need to demonstrate your professional capacity to lead them through the process. You should have a “prep kit” ready to go to help them prepare a financial plan for the divorce process to include such items as:
- A list of expenses and how they might change for each spouse.
- An inventory of jointly or individually owned assets.
- A list of debts and liabilities by couple and individual.
- Reviewing any pre-nuptial agreement and how it affects the division of assets.
- A list of life, disability, or long-term care policies.
When a divorce settlement is proposed, you can help each spouse understand the potential financial impact of each provision, including possible tax consequences, and create a financial plan to guide their financial decisions post-divorce.
#2. Death of a spouse
The critical aspect of helping a client after the death of a spouse is understanding the grieving process and when to reach out to offer your support and advice. It’s important to establish a protocol to follow, such as
- Sending a condolence letter
- Attending the funeral
- Contributing to a cause the deceased spouse cared about
- Being patient and giving your client time to grieve
Your protocol should also include reminders not to move too quickly to financial matters or pressure your client into making quick decisions. They will be ready in their own time. However, if you are concerned about their immediate financial needs, it would be essential to bring them to their attention. When they are ready, help them prioritize issues, so they are not overwhelmed.
This can all be made easier if you include in your plan having a ‘what if’ conversation with your clients to help them prepare for the possibility of one or the other spouse dying unexpectedly and how they would want their financial life organized.
#3. Drug addiction
You might be surprised to see this on the list of common life-changing scenarios, but you shouldn’t be. Opioid addiction has been declared an official public health emergency in the U.S., and, chances are, you may know someone who has been impacted by this crisis. As a financial advisor, you may be in a position to tell if a client or someone in their family is struggling with opioid addiction, and it would be incumbent on you to safeguard their assets.
There are often tell-tale signs when someone is struggling with drug addiction. Erratic spending, unexpected withdrawals from retirement accounts, increasing debt, or any pattern of uncharacteristic financial behavior are potential red flags that something is amiss. These behaviors can lead to abrupt changes in family life, such as a divorce or a child moving back home.
Your plan of action is to study opioid addiction to understand how it can take over someone’s life and learn how to support a person struggling with it. You should be prepared to initiate a conversation with a client, as sensitive as it might be, to reassure them you are there to help. You may be needed to help them plan their finances as they battle through the disease.
When your clients face any personal crisis, by helping them navigate through the darkest times of their lives and taking on at least some of the burden, you make a profound difference, earning you their trust and admiration.