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February 01, 2011 at 07:00 PM
With the death of her husband, a widow’s family and friends will be steadfast in consoling her. But whom can she look to for authoritative, practical guidance in the enormous task of restructuring her life?
Often, a financial advisor. And for FAs whose books boast numerous client widows, this aspect of their practice is one of the most gratifying. Though requiring lots of patience, empathy and loads of detail-work, helping new widows perhaps represents why many dedicated advisors, at the outset, considered financial services to be their calling.
“Working with widows is labor-intensive and can be arduous and complicated. But, it’s also very rewarding to see these women become high-functioning again, that the assets are properly titled and that the financial plan is working,” says Lori R. Sackler, vice president and senior investment management consultant with Morgan Stanley Smith Barney. Based in Paramus, N.J., she focuses on families in transition.
In the United States, about 700,000 to a million women are widowed each year. Approximately 75 percent of widows are 55 or older; and widows account for 53 percent of women 75 to 84, according to U.S. Census data.
The two biggest challenges that face advisors helping recently widowed women are a lack of preparedness about their finances coupled with a profound fear of outliving their money. The FA’s process, of course, is easier with existing clients, provided he or she has helped them to prepare.
Working with referrals is the more difficult scenario because these widows are apt to lack a grasp of their investment portfolios and have not completed adequate retirement planning. Worse still, are those who have never so much as written a check, having deferred all financial matters to their husbands. They are indeed way behind on the learning curve.
One third of Dudley Barnes’s clientele consists of widows. “Most don’t care as much about the nuts and bolts of the investments as that they’ll be conservative, income-producing and able to sustain them over a lifetime,” says the independent, whose Barnes-Pettey Financial Advisors, managing assets of about $650 million, is affiliated with Raymond James & Associates. Based in Clarksdale, Miss., the practice is spread over five offices.
Barnes continues: “Typically, we make sure they have plenty of cash sitting around — maybe six months’ or a year’s worth of income in money markets. We find that increases their comfort level.”
A prerequisite to helping widows — and widowers, for that matter — is “a high emotional I.Q.,” says David Finkel, a managing director, investments, with Bank of America Merrill Lynch. “Absolutely, it’s being a psychological counselor first and foremost. The numbers take care of themselves.”
An empathetic approach, top listening skills and a major feel for pacing the process to avoid raising anxiety are essential.
“You need to be sensitive to their fears. Although the women may not say it, it’s the bag-lady syndrome,” says Stephanie L. Ackler, a managing director, investments, who heads Ackler Wealth Management of Wells Fargo Advisors, in New York. “They’re afraid that when they wake up one morning, they’ll find they have nothing.”
Voice of Reason
In serving the widow, the FA must play a variety of roles in addition to financial consultant: facilitator-mediator with family members, educator, partner and friend, to cite a few.
Often, notes Finkel, who manages $430 million in assets and is based in Merrill’s Atlantic County Office, in New Jersey, an advisor must be “the voice of reason.” For example, “well-intentioned children may pull at Mom or Dad to quickly sell their home and relocate near them. But frequently that’s a wrong decision.”
“Advisors,” Finkel cautions, “should be very leery of family members or third parties who want to make major decisions for the recently widowed. These clients tend to be vulnerable, in a fog and easily influenced. They need to slow down.”
Barnes, who prepares client wives by making certain they’re included in the investment planning, says widows he advises are generally ready to meet with him within a month of their husbands’ death.
“Most widows have no idea for the first three to six months what their income need is going to be. So we typically give them some income that we both think will be adequate; then in 90 to 180 days, we reevaluate the budget,” he says.
In serving the widow, start by involving another close family member. Then put together a team that includes the client’s accountant and estate attorney. Wills and trust documents need to be assembled, and all assets must be located. A cash-flow statement is essential, as is retitling assets so that they flow in sync with the directives of any trusts involved. In due course, the FA will design a new, and necessary, financial plan.
One point advisors with expertise in this client sector stress repeatedly: Never rush widows.
“You’re trying to get a sense of where they are but not pushing them,” says Wells Fargo’s Ackler, who manages assets of about $200 million. “Sometimes they get fearful of making a lot of changes immediately and feel pushed into it. So you draw it out, giving them some big-picture clarity about the process and emphasizing: ‘We’ll work together over the next year.’ That way, it becomes a partnership.”
