As fiduciaries, it's our job to push clients to think about uncomfortable aspects of their lives. To name a few: discussions around retirement and death, providing feedback on spending, estate planning, gifting to family members — or saying no to adult children.
Bringing up challenging topics can be awkward and painful. Yet I've never lost a client for asking necessary questions. Advisers need to step up and become comfortable with the uncomfortable.
This part of the job will never change: Every family faces difficult life decisions that impact their finances. Here are a few of my experiences– and key learnings.
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Laying the groundwork
My key observations:
1. If you serve in a fiduciary capacity, issues that present potential hazards to clients' financial security must be raised.
2. When raising a sensitive topic, it's important — and breaks the ice — to first ask permission to raise it.
3. Be patient; don't expect instant results. Clients likely need time to process any changes or new approaches. These kinds of decisions usually require follow-up and time. The client might need years to implement your advice and remedy the issue.
4. Warn clients from the get-go that you don't shy away from hard questions about their best interests. We call these "fearless conversations." During the first meeting with prospects, we describe these interactions as fundamental to the kind of advisory relationship we offer.
With family matters come intense emotions
I call it "the moment of truth": What you are about to say to a client will touch on powerful emotions that potentially could impact their most cherished relationships.
Many sensitive conversations involve clients' immediate families. A particularly touchy topic is lending or gifting funds to adult children or other family members. Sometimes there's guilt involved, like making up for someone not being the "favorite" child. Or in the case of a blended family, one parent might feel strongly about a loan or gift, while the other might be resentful. In short, expect hefty family dynamics.
As an adviser, you're not there to micromanage. Your role is to call attention when loans or gifts are putting your clients' financial futures at risk. You might suggest they include the gifting as a "goal" into their financial plan, so you can track it and make sure it remains sustainable.
I always try to lead with the financial plan because it involves numbers — not judgment. My chief message is that I care about them and want to bring critical issues to their attention. Clients typically know when gifting is an issue and appreciate help with strategies and resolutions.
Other sensitive topics include:
• Reviewing estate plans. Pointing out inequities in outcomes following a death — and potential hardships for the surviving spouse. In one case, it took three years for a couple to finalize a plan that felt fair to both.
• Overspending. If distributions going to a client are not adhering to their financial plan and are unsustainable, we need to take a deeper look.
• Questions about a child's capacity to manage a bequest. Are safeguards needed? Should assets be kept in trust and a corporate trustee be appointed?
A deeper relationship
I'm happy to report that it does get easier, and virtually every time I've needed to ask the hard questions, the long-term outcomes have been positive. In the short term, emotions may arise — or not.
Most clients recognize your courage in discussing profound, difficult issues. Invariably, your willingness to fight for their interests will deepen their trust in your relationship and your value to them.
Nick Strain is senior wealth advisor at Halbert Hargrove.