Most advisers have had the experience of answering anxiety-ridden calls from clients saying they've been laid off, perhaps many during the early days of the Great Recession.
What may surprise advisers is that more than half — 56% — of workers will face a layoff or other job separation after age 50. This was one of the
startling stats in reporter
Greg Iacurci's cover story last week on the many ways advisers can help their clients traverse such a deep pothole in their financial plans when it materializes en route to retirement.
The first step is to help the client not overreact to what could be a short-term bump in the road. Any client of a financial adviser hopefully has emergency funds in place — at least a small pool of more liquid assets to withdraw that can later be replaced without too much long-term damage.
If unemployment drags on, however, a client's morale will start to drop as quickly as their net worth. At that point, looking at money in taxable investment accounts and even equity in a home may make sense. What almost all the advisers Mr. Iacurci spoke with for his story agreed on was that clients shouldn't dip into a retirement account unless absolutely necessary.
But after cutting expenses to the bone, there are avenues for lessening the pain of having to withdraw money early from a nest egg. Clients can roll assets from a former company 401(k) into a solo 401(k) plan, which would then allow for loans. There's also an "age 55 rule," which allows those age 55 and older without a job to draw from their 401(k) before age 59½ without a 10% early withdrawal penalty.
The problem in many cases, though, is that short-term emergency planning can extend into years. Older people face ageism in the U.S. economy, despite its being illegal. And those who do find new jobs often don't come close to matching the status and salary they enjoyed before being laid off.
(More: What advisers can do to help older clients start a new business)
But that's no reason to give up; it just requires more creativity.
Advisers can help their clients think more broadly about opportunities out there to exploit their vast knowledge and professional experience. For some, it will mean shifting from the role of employee to that of employer — and entrepreneur. As Mr. Iacurci reports, a recent MIT and Northwestern study found that middle-aged and older business founders have the highest success rates, compared to their younger cohorts.
Advisers can help new business owners in many ways, from recommending a team of professionals such as accountants and lawyers to drumming up capital to just being a sounding board and cheerleader.
In fact, whether your clients are entrepreneur material or not, being there to talk through concerns and figure out a new plan to match a new circumstance is exactly where you prove your worth beyond transactional advisers and the less holistic competition.
