Outside-IN

Bad things happen to good clients — and your response is critical

How advisers deal with their clients' life-altering events can distinguish them from their competitors

Sep 17, 2018 @ 1:35 pm

By Steve Gresham

Life happens. Typically when you least expect it, something happens that's neither anticipated nor welcome. Bad news can arrive from many sources — your father's doctor, your doctor, the police, your spouse. The impact can be devastating, sometimes life-altering, with significant implications for your lifestyle.

When you advise dozens of families, the chances of seeing such life events is multiplied. Your response to a client's life event is critical — especially if you can help.

Unfortunately, that response is not uniform across the world of advisers, creating opportunity for professionals who are more alert, prepared and empathetic. Life events remain the second most common reason that clients engage with advisers, especially planning-oriented advisers. (No. 1 is that they finally got around to doing some planning.)

Are you ready for life to happen to your clients? There are different levels of readiness — sorted by the perspectives of what, how, when and who.

"What" is the list of life events that can affect your clients, events for which you should be prepared to respond and support. This list can't be too long. Many new advisers get tripped up by not anticipating a vulnerability they haven't yet experienced. When advisers fail to act, they further demonstrate that inexperience. And the adviser learns.

Death and divorce are the leading "whats." By comparison, disability is often overlooked — and can be more complex, especially for a business owner. I recall a top wirehouse adviserl, years ago, losing a huge business-owner client who was an avid motorcyclist. A serious highway accident left the executive unable to manage. he lost the business (no one ever has succession plans), and the adviser paid the price when the rider blamed the adviser for not having helping him prepare.

Other examples that catch some advisers (and clients) by surprise include the need to provide financial support for relatives, serious theft or financial loss in a business, fire, mudslide or storm damage (most people are underinsured — by a lot), and litigation involving a relative (think of the Duke lacrosse players in 2006, whose legal costs totaled an estimated $2-$3 million each). And just because you don't provide preventive action (such as disability or liability insurance) does not absolve you of the responsibility (and opportunity) of helping your clients prepare.

(More: The transformation of the adviser-client experience)

"How" is a twofold issue of preparation and reaction. Probably the most valued aspect of top advisers is their ability to help clients prepare for the road ahead — a road littered with potholes. You can't prevent everything but you should have a plan for the potential axle-breakers. And the best way to prepare clients is to have a good anecdote about each of the major risks. Those anecdotes reinforce your skill, experience and professionalism — even if the client doesn't take action. How many times have you heard someone say, "I know I have to get after that — thanks for reminding me."

The second aspect of "how" is your reaction, which is almost as important as the strategy you employ. Most of the events are potentially devastating and life-changing for clients, so they are likely very distracted, even distraught and possibly in shock. The empathy you summon here is critical.

I will never forget the story of an adviser fresh off a sales training program. The wife of a longtime client made an appointment but didn't state a specific purpose for the meeting. The adviser saw the opportunity to take the new language out for a spin. "What would you like to accomplish today?" he glowed upon her arrival. "I'm not sure — my husband passed away unexpectedly a couple of weeks ago and I'm just not sure what to do," the woman said in a very shaky voice. "I'm sorry to hear that. What would you like to accomplish today?" the adviser pressed on with his script, oblivious to the human moment in front of him.

Extreme? Maybe by degree, but not really any different in substance from being uncomfortable talking about dementia or a special-needs child or how to serve both parties in a divorce. Not many people seek out difficult and emotional situations. The thing to remember is that if the life event happens to a client, it is far more difficult, embarrassing and painful for them. Reaction is also about your ability to deal with the crisis professionally. Think of yourself as the "financial oncologist" — supportive and empathetic but also clearly in command and knowing what steps to take. That's comforting to clients.

(More: Death and taxes: A conversation we must have)

As is true with each column I write, I'm likely only providing you with a reminder — but hang on. Last month I pounded again on the crazy disconnect that most clients do not receive the industry standard communication from one or more of their advisers. If you want a worse statistic, think of how many advisers miss major life events because they simply didn't know they occurred. Let's talk about the "when," and you will see the potential to leapfrog past your competition before most life events take place.

Timing is everything — especially when you are trying to be proactive and the client has three to five additional financial services relationships. The "when" in most life events is pretty easy to manage. Here's where CRM proves its value.

Starting with just the ages of your better clients and their family members, you have clues about when some issues are more likely, and you can build time-based triggers into your CRM to drive calls to action. Age alone can improve your timing. For example, turning age 50 is a big deal — and a great time to consider better financial planning, followed by 62 for a Social Security evaluation, 65 for symbolic "retirement age," 70 for required minimum distributions, and on from there. Events such as births, deaths, weddings and anniversaries also trigger action opportunities with clients. It's pretty hard to turn down an adviser who acknowledges a life milestone and suggests a discussion to make sure the financial plan is still appropriate.

More complex "when" actions involve intersections. My favorite financial planning tool was adapted from a chart that a minister gave me many years ago. He used it with younger people to help them with premarital counseling, but I adjusted it to fit a baby-boomer couple and retirement planning. The essential elements are a list of the people most important to the couple and the ages of all the parties today. When laid out on a grid and projected forward in five- to 10-year increments, you reveal intersections — collisions — of aging and planning challenges. Here's a link (scroll down to Timing Evaluation Worksheet).

Using the timing projection, it's very common to find the classic baby boomer "sandwich" of aging parents and adult children. But also look for the "contingent" liabilities of a cousin, aunt or sister who hasn't saved like your client and ends up in trouble. Consider the contrasting data on your client and spouse as they look out at years when they might still be around. A 65-year-old today has a life expectancy of 85 if a woman and 83 for a man. Look around and ponder the impact of those years and then layer in the potential demands from other family members. Even savvy investors can be surprised by this perspective and it gets them talking — and bonding with you.

The final perspective on life events is "who." This is where top advisers shine. I'm talking about your ability to help clients see that some life events just happen, even to those who don't expect them. The magic words expressing adviser added-value: "I didn't think that could happen to me — thank you."

Ask a certified divorce financial adviser or a good estate planner why their client loyalty is so high. Talk with Carolyn McClanahan, a 2017 InvestmentNews Innovator, about how she helps clients and their families better understand the challenges of longevity and prepare for health-care expenses and making good decisions as they age.

As the sweet spot of wealth management, the baby-boomer households, ages, the advisory business will be driven more and more by life events and awkward moments and tough conversations. This will truly be the moment of truth for wealth managers. There will be consolidation of assets, and the winning advisers will be the ones most prepared to deal with those life events. Remember, life happens.

(More: Climbing the digital mountain)

Steve Gresham is former head of the Private Client Group at Fidelity Investments, an adjunct lecturer in public policy at Brown University and principal at The Gresham Co.

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