The advisor had worked for a few months with the highly successful client who owned a wholesale distribution company, carefully noting his goals, family concerns, and assets. The client quickly understood the advantages of updated wills for him and his wife, new life insurance trusts, and a new succession plan to allow his children to take over the business.
Then, just before implementation, the process braked to a stop. The unsigned life insurance applications and legal documents sat in the client’s desk drawer for several months.
When the advisor asked once again if the client would like another walk-through of the plan, he responded with a surprise announcement. “It’s not necessary,” he said. “I get it. What you did is great. It’s just not the plan I need now.” He went on to explain that he was going to leave his wife and wanted a revised plan that would account for a divorce and protect assets in case of a second marriage. “I’m ready to sign that plan,” he said. “As soon as we’re done with the new plan, then I’ll tell my wife the news. You’re great with advice. Any ideas on the best way to do that?”
The more intricate the financial and personal lives of clients, the more likely clients will ask for non-financial advice. Or, since advisors are in the business of helping clients and providing advice, they will tend to offer guidance in an area for which they may not have training. According to a new study of 1,374 CFPs, 25% of the contact with clients is about non-financial issues, and that amount of time has increased over the last five years. These study participants listed their non-financial discussions as ranging from divorce, health, death, depression, children’s emotional problems, spending problems, religious/spiritual issues, and addictions, among others.
Two researchers from the University of Louisville, David Dubofsky, PhD, CFA, a professor of finance and associate dean for research, and Lyle Sussman, PhD, a professor and chairman of the department of management and entrepreneurship, published research that quantifies the extent of life coaching activities by financial planners in the August and September issues of the Journal of Financial Planning.
Beyond the Numbers
Related to the anecdote above, 57% of the planners said that clients had told them non-financial secrets that no one else knew. Moreover, almost 34% of the advisors said clients asked them if they should or should not get a divorce. Given the sensitive nature of such discussions and others, planners have observed clients in some very emotional states.
“It just jumped out at me that we’ve had about 74% of planning sessions where a client is manifesting emotional discomfort–crying, trembling, sobbing–and the advisor had to cancel the session,” noted Sussman in discussing the findings.
The extent to which advisors may encounter emotionally distraught clients was captured in a remark made by an advisor who related that the most important tool in her toolbox was nothing more than a box of Kleenex. “Financial planners know sensitive issues about some of their clients’ lives that no one else on the planet knows, not even a legal advisor,” concludes Sussman. The study’s findings suggest as well that advisors know more about their clients than do many spouses. One finding was particularly surprising to the researchers: that 10% of the planners reported that they were aware of a client considering suicide.
Dubofsky and Sussman concluded that many financial planners serve as therapist, psychologist, social worker, and even clergy member for their clients.
Life vs. Clinical Planning
We had all these open-ended responses at the end of the survey,” reports Dubofsky. “We went through all of them and were struck by the passion by some of the people–respondents that were either for or against this idea of coaching beyond financial issues. What struck the researchers from those comments, he says, is that it’s “almost schizophrenic in how planners view themselves, what their roles should be, what their profession is, and what they should be doing for their clients.”
For advisors who take the advanced planning team approach for high-net-worth and ultra-high-net-worth clients, the choice of focusing on clinical planning versus the holistic life planning isn’t as split, however. Advanced planning requires a comprehensive thoroughness that will examine and account for any aspect of clients’ lives that can have an impact on their financial security and goals–and that certainly includes the full range of emotional challenges they may face.