Advising women through transitions

Aug 17, 2014 @ 12:01 am

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The Following is an edited version of a webcast on female investors held July 22. It was moderated by Mary Beth Franklin, contributing editor at InvestmentNews, and deputy editor Greg Crawford. The panelists were Susan Bradley, Kathleen Rehl and Justin Reckers.

Ms. Franklin: Women who are divorced or widowed face steep emotional changes and new financial realities. It's also a difficult time for advisers, who have to help clients navigate challenges.

Ms. Bradley: When we did a survey of women about life transitions, one question was, "Do men and women manage transition differently?' Ninety-two percent said yes.

So, from an adviser's perspective, thinking about the stress of change and the anger, the grief — and the excitement sometimes with good transitions — it's compromising someone.

At Sudden Money Institute, we had to develop stress management tools for women in transition. We had to go outside the traditional financial planning world, and sometimes we learned from classroom teachers.

Advisers are good on the technical side — financial planner, lawyer, accountant — but the personal side drives decisions. It's where the taboos, hopes and dreams, fears and expectations live.

Ms. Rehl: Seventy percent of widows fire the couple's adviser after their spouse dies. After I became a widow in 2007, I got it.

And even though I'm a widow, I don't pretend to tell another widow, "Oh, I know exactly where you are,' because I don't. A younger widow whose robust husband died unexpectedly may experience grief differently than an elderly one whose frail husband passed quietly in his sleep.

Mr. Reckers: Just like with a death, there's a grief cycle that needs to be worked through in a divorce. The difference is that you're negotiating in a divorce.

Advisers need to ensure that clients understand the gravity of the decisions they'll be making, that they educate themselves to be fully active participants in the process.

Ms. Bradley: There's a stress response to change — even if it's a welcome event — that inhibits cognitive functioning and compromises decision making.

The process of traditional financial planning is pretty linear. The life experiences we're discussing are nonlinear.

Ms. Franklin: What do financial advisers need to know in these circumstances — death, divorce or even an inheritance?

Ms. Bradley: One thing is communication. How do people prefer to see information, to make decisions? Women are looking for real connection. They want to feel confident, to understand what their choices are, the consequences.

Ms. Franklin: What are helpful communication tips for advisers?

Ms. Rehl: When you're dealing with a widow, don't offer a cliché like, "I'm so sorry.” Say something like, “I can't imagine what you're going through.” And ask an open-ended question like, “How has this past week been for you?'

Also, speak the late husband's name. Maybe offer stories. "Every time I see the yard and all the beautiful plants that he put in, I think about Joe.'

And don't say, "Call me if you need anything.' It sounds compassionate but puts the burden on the grieving widow.

You might say, "You need to focus on being with your family right now and being loved. How about if I give you a call next week?'

Ms. Franklin: Vulnerable, sad and perhaps angry divorced women may have a problem using "his' name. Justin, how do you deal with the elephant in the room?

Mr. Reckers: It's interesting that you mention using someone's name, because I've also noticed it's important.

This is by no means a bulletproof rule, but what I've experienced in working with divorcing women during and after their dissolution proceedings is they often struggle with how to refer to that former husband. And there's a couple of different communication theory things going on beneath that.

If it's an amicable divorce, they may want to call him by his given name. Others refuse to speak about him at all. And then, there are all the standard derogatory names that everybody has reserved for their former spouses. If I call him Mr. or Dr., am I showing him too much respect? Am I not on her side?

So I've developed a terminology that helps us communicate. We call the former husband the "was-band.'

Ms. Franklin: I love that!

Mr. Reckers: It initially gets a giggle. But most clients have adopted it wholeheartedly.

Ms. Franklin: How does an adviser become more expert at dealing with sudden transitions?

Ms. Rehl: There are three distinct stages to adapting to being a widow.

Initially, she is under a great deal of stress. Advisers need to step back and know that the best function they can serve at that point is performing financial triage: cash flow, paying bills, health insurance. The widow needs to be heard, to be understood. She's vulnerable. It's a time to protect her. She doesn't want to be making any big, irrevocable moves.

It may be as long as a year before she moves into the second stage, the growth stage. That's when the adviser can do more general planning, such as re-evaluating the portfolio, and make preretirement and housing decisions.

During this stage, you may also witness what I call the "controlling from the grave factor,' where the widow is apprehensive about getting out of some highly risky stocks because George picked those.

"If I get rid of those stocks, it's like I'm slapping him in the face.' But you will be re-evaluating the portfolio and explaining why certain things are recommended or necessary.

Stage three is what I call the grace or transformation phase. It's a time of reinvention and repurposing, when she feels like an independent woman. It took me five years to get to that stage.

Ms. Franklin: How do advisers recognize the various stages in a client they may see only periodically?

Ms. Rehl: They will talk about what's going on in her life rather than just jumping into quarterly reports. She may be talking about traveling, a new house. If she's still working, maybe changes going on there.

Not all women go to stage three. Some are comfortable staying in stage two, and that's a good place, especially for some senior women.

Mr. Crawford: How do you determine whether it's appropriate to make portfolio changes in the grief stage. Clearly, you don't want someone making decisions when she's emotional.

Ms. Rehl: You don't allow anything drastic. For instance, a $500,000 life insurance policy comes in, and you say, "We're going to set that aside, put it into a money market account linked to the insurer that's paying 3%. When the time is right, we'll make a decision.'

Ms. Franklin: Justin, how do you deal with that with divorcing clients?

Mr. Reckers: They do go through similar stages; upset, angry, disappointed. Even those who are pulling the trigger aren't necessarily more ready to move forward. I concentrate on their taking control: This is your opportunity to remake your financial future based on your goals, not your husband's. It gets them engaged.

But if you find yourself pushing a woman to make changes during that stage when she's numb, you'll just end up upsetting her.

Mr. Crawford: You're trying to get up to speed with a new client who is going through this tremendous change. What strategies can you recommend for gathering financial data in such a case?

Mr. Reckers: Whenever possible, I get the financial information for the client. If we're working on a cash flow management plan, let me have access to your bank accounts. My staff and I can get transaction and other data. Give me approval to speak to your tax preparer, your estate planner, to get the information I need.

Ms. Franklin: Are some new clients reluctant to turn over control?

Mr. Reckers: A lot of people are hesitant because they've never had responsibility for these affairs. Or, even if they were referred by a trusted friend or a lawyer, they want to do their due diligence.

For investment management, I often start out with an old-fashioned dollar cash averaging. So, we have a million dollars, let's take it in steps. Let's not throw it all into the market at once. Let there be comfort developed, some trust created between myself and the new client.

Likewise, if there's any concern about whether I'm a long-term option for them, I reiterate that I'm here to help now.

Ms. Franklin: Do many divorce clients stay with you?

Mr. Reckers: About 70% to 80% of clients will transition from divorce to wealth management. It's because we develop a trusting relationship during the dissolution process. During the largest financial transaction of their life, in the midst of emotional chaos, they can trust me. They see how I work and communicate.

If you help a client through a divorce, they're almost your client to lose.

Ms. Franklin: When Mom is suddenly widowed and comes into a chunk of money, how do you fend off those adult children who say, "Great, now you can help me buy a house.'

Ms. Rehl: One of the biggest fears most widows have is ending up a bag lady. But this is another kind of a bag — a purse. Don't be a purse for others.

We had a case where a son approached his stepmom after his dad died. He wanted his inheritance right now. And that's not what the will stipulated. He would get some money after the wife was taken care of.

Widows will be approached by people — family, friends, acquaintances — with ideas about investing in a stock or a business. In my workshops for widows, wives and friends, I tell them, "Stand in front of a mirror and practice saying this: “That's an interesting idea. I'll think about it and get back to you.”"

One of my oldest widows, who was 90 when she died, said, "It's not only being careful about not being a purse for others — you also don't want to be a nurse for some future relationships. And God forbid, you don't want to be their mother.'

That's wonderful advice.

Ms. Franklin: When people come into money for whatever reason, they suddenly become a touchstone for everyone else. How do you help advisers guide their clients?

Ms. Bradley: There are stages when a woman is more susceptible to these kinds of expectations and demands. Everybody remembers a client, either widowed or divorced, who started to support adult children — mainly as a way to maintain that tie.

Sometimes, when the other spouse is diagnosed with a terminal illness, there is an ending stage. And then there is this passage stage. Ending and passage are pretty dynamic. This kind of follows Kathleen's three stages, the ending, the passage and the new normal. And there are levels of expectations throughout all this.

We have a decision-free zone that we work on right at the ending stage if we have the opportunity. It's not a no-decision zone, but everything is put into a soon or later category. So, we divide by timeline and by urgency.

We then help the widow or the divorced woman, or the inheritor or retiree craft a decision-free zone statement to family members or whoever is important.

It might say something such as, "This is so much more complicated and is going to take me a lot longer to figure out than I could have anticipated. I'm working with an expert, and we're not going to make any decisions for at least a couple of years. I can't even begin to commit on helping you with a mortgage or paying off your student loans. I can't even begin to commit that I'll be able to do it at that time.'

It's a way of sorting the good guys from the bad guys.

Another technique the audience might find helpful is a chart we use. On the left side, in conversation with the client, you list all the people who have expectations that she's aware of. In the next column you list what she expects, and in the next column why we think that she thinks they're expecting that. In the last column, we list how she feels about it.

It takes this conversation that's big and confusing, and organizes it into a format in which you can address things one at a time.

Ms. Franklin: Justin, how do advisers who are interested in getting into this divorce transition niche go about it?

Mr. Reckers: You need to understand the divorce process from a technical financial perspective as well as from a process perspective.

Because divorce can be a difficult specialty, it has a high barrier to entry, so you'll have a large referral stream from lawyers, mediators, therapists — those who recognize that financial advisers concentrate on divorce transition and helping people afterward.

Those other professionals know that you can truly understand what their clients will be going through, and you can help them with creative strategies, be their advocates, help educate them.

We have built a business that synergizes the divorce and the wealth management practice. And we're teaching other advisers around the country how to do the same — market themselves to lawyers, do that technically heavy work, and build it into your asset management business and your other financial planning practices.

Ms. Franklin: Kathleen, any insights into focusing on transitions?

Ms. Rehl: Establish yourself as an authority. You do that by writing in local publications: The Three Big Mistakes for Widows to Avoid. Get out there speaking. There are so many places that want speakers: congregations, temples, libraries, community learning centers, garden clubs, book clubs.

Women like to learn. They don't like to be sold, but they like to learn. And it can be an event where they come together as a collaborative. It can be fun. We've done a Valentine's Day event for ladies who don't have husbands.

Make it highly interactive and engaging. You're not selling anything. You're just there providing your expertise. Remember that statistic: Seventy percent of clients leave their adviser when the spouse dies. Widows are so appreciative. Once one is with you, once you do right by her, she's with you for life.

Ms. Franklin: Susan, do you have any tips on how to become a transition specialist?

Ms. Bradley: The 70% is always interesting, because it's good news for any adviser who functions as a thinking partner, who has the expertise Justin is talking about and the platform to work with. You want to be on the receiving end of that 70%.

We create education programs for law firms, estate planning councils, CPA firms in the area of decision making. How do clients make good decisions? In estate planning their average implementation rate is pretty low, like 30%. I don't know it as a fact, but I hear it all the time from the estate planning people we work with.

We go to centers of influence and provide information that's important, that helps them with their clients. That work also establishes our advisers as the experts in the area, as the Certified Financial Transitionist.

We've also created the Transition Fatigue Assessment, a free tool that you can try online and will help your clients gauge if they are in transition fatigue. It gives advisers ideas for what to do for someone with that kind of stress.

Ms. Franklin: Again, that 70% statistic. What is the reason widows give for firing their adviser after their spouse dies?

Ms. Rehl: Here's an illustrated example: After a client's husband died, the adviser called and said she needed to sign some paperwork. She went into the office, and he started talking about how she was beating the market, showing her graphs and charts.

She told me, "I didn't care that I was beating the market. I wanted to know if I could help my granddaughter with college, if I was going to have to move, if I was going to be OK.'

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