Dealing with clients is never about cookie-cutter standards of treatment. But it’s important for advisors to understand and learn how to deal with clients who are going through a life transition.
According to a Wells Fargo/ Gallup Investor and Retirement Optimism Index, one-third of investors seek advice during a major life change. The index found the top three reasons people seek financial advice are retirement (71%), divorce (64%) and death of a close family member (52%).
They also found that 35% of investors said they would seek financial advice upon getting married, 34% of investors would seek advice upon changing jobs, and 32% sought advice when everything in their lives was going well.
Advisors who gain the trust of their clients in times of crisis, like a divorce, stand a good chance of getting more business from them in better times. Justin Reckers of Pacific Divorce Management told ThinkAdvisor in an interview that 90% to 95% of clients he represents in divorce mediation stay on as wealth management clients.
The five situations below are just a few of the important transitions to be prepared for. It’s fundamental for advisors to keep in mind that everyone comes to them with different needs, wants and goals, and the advisor’s job is to figure out how to best achieve them.
Here are five major life events that drive clients to seek advice, along with tips from advisors on how to best serve those clients.
Many couples are choosing to get married at a later age. Often when a person says “I do” later in life, they are more financially secure and stable.
“The biggest thing to remember with marriage is to make sure their [the clients’] financial goals are on the same page,” said Russell Rivera, a CFA at Voice Wealth Management, a New York-based firm, to ThinkAdvisor. “They don’t have to do things the same way, but they have to understand and communicate financial goals to one another.”
Unlike a first marriage, couples who were previously married might have opposing financial goals depending on their individual situations. They could have gone through a divorce or been widowed. Both scenarios carry similar financial implications.
Wayne Titus, president of AMDG Financial in Plymouth, Michigan, tells ThinkAdvisor that both parties should lay everything out. “Lay your financial cards on the table,” Titus said. “Get a copy of your credit reports and share with one another. A credit report shows evidence of how each partner handles debt and meets financial obligations.”
The situation can get tricky when both parties have children from their previous marriages, Titus says, especially if the children are of different ages. It’s important for advisors to discuss those differences and set up a financial plan, Titus says.
“Discuss a prenuptial agreement,” Titus said. “These agreements can be useful tools in situations where there are children from a previous relationship or one partner has substantially more assets.”
And while Titus says it’s okay to divide the financial planning tasks, advisors should make sure that couples are “aware of what each person is doing.”
3. Birth of the First Child
Advisors should encourage their clients who want to start a family to plan for their children’s expenses even before they are born. Things like education, daycare and even the possibility of a parent dying are all financial obligations that should be thought of in advance. “The sooner you can do educational planning the better off you are,” said Rivera of Voice Wealth Management.
Rivera suggests that advisors tell clients to revisit any life insurance plan they might have, and that it's important to maintain a life insurance policy on a spouse who doesn’t work. “If that spouse dies, you’re now going to pay for childcare that you wouldn’t have had to worry about before,” Rivera said.
It’s also important for clients not to forget themselves, Rivera adds. “You can’t borrow for retirement, but you can borrow for college. That’s the one-sentence advice that I always give to people.”
This can sometimes be a long and arduous process. It’s in the advisor’s interest to suggest that the clients don’t delay the proceedings.
“Help them build a team of advisors,” UBS advisor Nicholas Barbieri told ThinkAdvisor, but advise clients to take their time when picking a suitable attorney.
“A lot of people will come into this process, which can be overwhelming for the client.”
Barbieri, a CFP and a certified divorce financial analyst (CDFA), suggests that advisors make sure they understand where they fit into the process. “Attorneys are not financial experts and financial experts are not attorneys,” he said. “Make sure you just guide your client to help them avoid pitfalls, rather than shape the case.”
It’s also important to educate the client financially. “Financial planning process and education is paramount in the divorce process,” Barbieri said.
One important job of an advisor is to make the client’s life easier. Barbieri suggests getting all of their paperwork in order, from investment reports to financial plans.
“Attorneys are expensive and some charge by the hour,” he said. “By preparing [clients] with the necessary information, you could cut down some of their divorce cost.”
5. Widowhood and Death
When a spouse dies, the client is probably not focusing on financial strategies or the next steps to take. This is why a trustworthy and responsible advisor is necessary.
“During the loss of a loved one or a traumatic life event, money goes into motion,” said Paul Saganey, president and founder of Integrated Financial Partners in Waltham, Massachusetts. He says that advisors should be aware of what money is going to start moving — whether it be a life insurance policy, retitling of assets or anything else.
He also says that advisors should become problem solvers and do the extra homework. “Don’t ask a client to do things; stop and take second and see if you can do it for them,” Saganey said. “You want to be seen as someone helpful, not causing more issues or challenges.”
When helping one client deal with a loss and issues of death and dying are top of mind, this might also be a good time to check in with other clients. Saganey says that advisors should pose these two questions: “Does everyone know what’s going on [with the family finances]?" And in the event of a death or divorce, "will they have enough money to survive?”
Related on ThinkAdvisor:
- Broken Trusts: The Man Who Married His Wife Six Times
- Divorce Planner’s Novel Approach Leads to Lucrative Business
- The Uncomfortable and Inevitable: Planning for Death and Disability
- Grieving Clients, Sensitive Advisors