From Financial Advisor IQ, January 7, 2015
In an ideal world, professionals would always be able to tell clients exactly what they’re doing wrong with their lives. It would improve the clients’ finances and reduce the professionals’ stress. But in reality, that kind of candor would jeopardize valuable relationships. Instead, much goes unsaid, even when clients let family dysfunction or personal instability affect their wealth.
Yet ignoring an elephant in the room can do more harm than good, experts say. That’s why professionals need tactful ways to get their messages across, no matter how sensitive the issue. Using proxies, storytelling, delaying tactics and simple arithmetic all have their virtues, according to professionals.
Calling for backup often works at the Center for Financial Planning, which manages $900 million in Southfield, Mich. One elderly client there is in deep denial about his Parkinson’s-related dementia, and it doesn’t help that family members have downplayed his illness. His lead advisor still manages to conduct financial-planning conversations with the client. But when it comes time to discuss physical safety — for example, whether the client should be driving or can stay home alone — the advisor hands off the conversation to the firm’s gerontology expert, Sandra Adams.
“The lead advisor wouldn’t feel comfortable discussing this, because that advisor has a long-term relationship with the couple,” says Adams, a CFP with over seven years of experience specializing in the needs of seniors. But Adams’ role allows her to suggest getting a geriatric care manager to assess the clients’ living situation, as a precursor to discussing whether it’s time for the husband to assign power of attorney to someone else.
With clients who suffer from mental or emotional instability, professionals need to exercise tact. Stalling for time is often a good approach, according to Ryan Wibberley. The CEO of CIC Wealth, which oversees $400 million in Gaithersburg, Md., has a wealthy client with severe bipolar disorder who, when in a manic phase, calls the office as often as twice a week. Trying to talk him out of rash investment moves, like trading in response to a slight market hiccup, leads to frustrating and confusing conversations, Wibberley says.
The advisor rarely tells the client his mental condition is affecting his reason, since that often makes him even more agitated. Wibberley usually lets him rant for a while and then insists on finishing the conversation in a couple of days, so the client can be sure of his decision. By then the mania usually subsides and no trades take place. “He told us right upfront about the disease, and that he’s his worst enemy in terms of finance,” Wibberley says. “Most of the time I’m trying to understand his situation and tell him what he needs to hear to get past this moment.”
When Steven Kaye, the boss of AEPG Wealth Strategies in Warren, N.J., suspects clients of financially self-destructive behavior but doesn’t want to offend them on a mere hunch, he turns to storytelling. He’ll cite examples of real people, as though he’s sharing an interesting tale for the sake of chitchat. But nestled in his tales are pointed warnings.
For example, he recently met with a wealthy doctor who lets her unemployed husband control their finances and doesn’t pay much attention to her assets. Kaye casually told her about a situation he’d heard of in which one spouse was secretly skimming money from the couple’s accounts. The doctor paid close attention, says Kaye, whose firm manages $800 million.
Numbers save the day for Thomas Mingone, managing partner at Capital Management Group, when he wishes he could tell a second wife to be satisfied with $3 million and tell her husband to stop worrying about how his heirs will remember him. Mingone’s New York practice, an affiliate of AXA Advisors, oversees $1 billion. The couple have been bickering over their estate plan, as the husband frets about how much of his $7 million estate to leave to his two financially irresponsible adult children from a previous marriage. So Mingone patiently works through various monthly budgets that would provide amply for the wife after her husband dies and still leave something for the kids. Sticking to facts reduces the couple’s arguments. Nevertheless, “there’s tremendous tension,” says Mingone. “It’s a minefield whenever we deal with them.”