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.