How To Effectively Manage 6 “Oh Bleep” Client Situations

This article is an excerpt from my most recent column in the Journal of Financial Planning.

Most financial advisors are adept at handling client questions and concerns about market-related events like a drop in the S&P 500 or a spike in interest rates. They are also proficient at managing important “happy” life occurrences like a child being admitted to an expensive college or a spouse inheriting a large sum of money.

But what about helping a client through the not-so-happy life events that inevitably occur? These “oh bleep” moments, like a client suddenly coming down with a serious long-term illness, can be challenging to successfully navigate. These situations not only constitute a significant financial risk to a client, but also produce strong feelings and emotions. Clients may express anxiety over a recent plunge in the NASDAQ, but such responses usually pale in comparison to their reaction to a diagnosis of lung cancer or the death of a spouse.

So let’s take a look at six “oh bleep” client moments and the steps that advisors can take to successfully manage the financial and emotional aspects of the situation.

#1 - “My wife just had a stroke and she will require significant medical care for the rest of her life”

It is virtually inevitable that a client or spouse will have a serious health event at some point during the client relationship. Almost 90% of adults age 65+ have least one chronic illness, like diabetes, hypertension, or cancer. Roughly two-thirds have two or more.[i] A major health event can have a profound impact on finances as well as choices about where to live, when to quit driving, and how to remain socially connected.

Conversation tips: As a trusted financial advisor, you should be prepared to provide your clients with both financial guidance and emotional support. Consider starting the conversation with a few open-ended questions that will help you identify your client’s greatest areas of concern.

Next best actions:?Help your client and spouse prepare for the lifestyle changes they will inevitably need to make and strive to protect them from additional risks to their financial security. Steps can include updating their financial plan to include scenarios for health and long-term care costs, encouraging them to begin to modify their home to make it aging friendly, and making sure that both members of the couple have an updated Power of Attorney, a healthcare proxy document, a living will, and other estate documents as needed.

#2 - “My husband just died of a heart attack, and my daughter wants me to come live closer to her”

Women typically live for about 12 years following the death of their male spouse.[ii] For many Baby Boomer and Silent Generation clients, the husband is the primary client contact and main financial decision-maker. Which means that the advisor may not know a newly widowed client very well. She may not have much familiarity with their investment portfolio or any financial plans. Moreover, most older clients have adult children, and many of them already have their own advisor.

Conversation tips: Empathic listening and caring responses create a context for successful conversations about grieving and loss. Everyone grieves in his or her own way, and the process can take a long time.

Next best actions:?Since she has recently experienced a highly emotional event, a widowed spouse should avoid making major financial decisions without input from an adviser or other trusted family members. It is especially important to involve the adult children in conversations. They will likely have additional relevant information, e.g., knowledge of other accounts, location of legal documents, etc., that will help you make this major life transition easier to navigate. Discuss not only the financial plan, but also options for how and where your client will live safely and affordably, including how she will meet her transportation and medical care needs.

#3 - “My father has been making some crazy financial decisions lately and he can’t explain or remember several recent transactions”

A Harvard study estimated the “peak age” of financial decision-making to be 53.[iii] About 14% of Americans over the age of 65 has Alzheimer’s or other dementia, and another 15%+ have mild cognitive impairment (MCI).[iv] Moreover, many clients, especially men, are unwilling or incapable of acknowledging that they are mentally slipping. They often do not want to allow others to help with and eventually take control of their finances.

Conversation tips: If you are concerned about a client’s ability to make good financial decisions, contact a trusted family member. Since the client may be unable or unwilling to account for his own actions, you should have at least one family member or trusted friend join any meaningful conversation. Moreover, a person with memory issues may not remember pertinent facts, and he or she may not recall important decisions that were made in a meeting.

Next best actions:?Start the process of transitioning important financial decision-making away from your client and toward trusted family members. It is important to take steps to protect them from financial scammers—and themselves. Closely monitor their account activities and place a hold on any suspicious transactions, and consider adding fraud monitoring software to their checking, savings, and credit card accounts and implementing a credit freeze.

#4 - “My husband just left me”

So-called “gray divorce” is on the rise for Baby Boomers. The divorce rate for adults ages 50 and older has roughly doubled since the 1990s.[v] Women can be especially hard hit financially by divorce. During their working years a woman earns 84 cents of every dollar her male peers earn which leads to lower savings.[vi]

Conversation tips:?A recent divorcee is likely to be anxious about her finances and her future, so it is important to show empathy and assure her that you have her best interests in mind. You should not expect to accomplish too much in any single meeting, especially early in the process.

Next best actions:?A recently divorced client may be overwhelmed when presented with a large number of options to choose from, especially if they have low levels of financial literacy. It is best to keep things as simple as possible, at least at the start. It may take weeks or months to educate the client and put together a new financial plan. Create a plan that includes projections of income requirements and spending needs and identify any additional trusted contacts who can help with financial decision-making

#5 - “I am really concerned about how much my spouse and I will need to pay for our health care”

For most adults, healthcare costs constitute a major expense, especially late in life. A study by The Milliman Institute estimated that a 60-year-old man who wants to retire now can expect to pay $257,000 (present value) in healthcare costs, while a woman will have to shell to shell out $277,000.[vii] These figures do not include the costs of long-term care, which can also easily cost hundreds of thousands of dollars more.

Conversation tips:?Remind the client that it is part of your job to reduce their exposure to all unnecessary financial risks, including those associated with paying for healthcare. Stress the importance of creating a plan that will be revisited on a regular basis and executed when necessary. When discussing and planning for healthcare costs, an ounce of prevention is worth a pound of cure.

Next best actions:?Older couples may be especially sensitive to the risk of (further) losses to their finances and personal autonomy. They will likely be reassured by frequent communications from you reminding them that you have a plan to protect them from high healthcare costs. Generate estimates of healthcare costs and long-term care costs, and update their financial plan to show the consequences of different living situations and lifestyle considerations.

6 - “My spouse and I would like to age in place, but we are not sure if we can afford it”

Especially now with COVID creating concerns about the safety of assisted living facilities and nursing homes, most clients are likely to express a preference for staying at home for the last years of their life. But staying at home can be expensive – usually more expensive than moving to a senior living facility.

Conversation tips. Choices about where and how to live later in life are some of the most financially consequential and emotionally charged decisions your older clients will have to make. It is very important at this time to show respect for their preferences and to take the time to learn more about their lives and goals.

Next best actions: Successfully aging in place requires a lot of planning and foresight. There are many things an advisor can do to help ensure that their older clients stay safe – both physically and financially. Most importantly, make certain your clients have the financial resources to support their decision. Estimate the costs of modifying their home to make it aging friendly, help them develop a plan for safe transportation,?and recommend they share their decision with their family and clarify what help they can expect to receive from other family members.

For most clients, these “oh bleep” moments constitute the situations they care about most—not a stock market correction or a rise in interest rates. If you can help them navigate these difficult times and mitigate the risks to their financial and retirement security, you have an excellent chance of being their adviser for life.?

[i] US Centers for Disease Control (CDC): Prevalence of Multiple Chronic Conditions Among US Adults, 2018

[ii] Compton J, Pollak, RA: The Life Expectancy of Older Couples And Surviving Spouses, National Bureau Of Economic Research Working Paper, September 2019

[iii] Agarwal S, Driscoll JC, Gabaix X, Laibson D: The age of reason. Financial decisions over the life-cycle with implications for regulation. Brookings Papers on Economic Activity 2009; Fall: 51-101

[iv] 2019 Alzheimer’s Disease Facts And Figures, Alzheimer’s Association

[v] Pew Research Center: Led by Baby Boomers, divorce rates climb for America’s 50+ population, March 9, 2017, https://www.pewresearch.org/fact-tank/2017/03/09/led-by-baby-boomers-divorce-rates-climb-for-americas-50-population/

[vi] Pew Research Center: Gender pay gap in U.S. held steady in 2020, May 25, 2021, https://www.pewresearch.org/fact-tank/2021/05/25/gender-pay-gap-facts/

[vii] Milliman Institute: A very expensive sandwich: How multi-generational Care Affects Women’s Health Costs, 2020