Important issues – so-called elephants in the room – threaten the financial futures of clients and their families. Clients and advisors normally recognize these issues, but because they are emotionally charged, they are difficult to discuss.
Here are three steps to talk about these subjects:
Bring up the issue at the right time.
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Raise it in the right way.
Introduce possible solutions.
Elephant in the room issues
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Here are typical issues that can sabotage even the best-crafted financial plans:
Clients who haven’t had open conversations with adult children about their financial situation and estate plans.
Instances in which providing ongoing financial support to adult children jeopardizes clients’ finances or creates potential disharmony among other children who don’t need support.
Wealthy clients who plan to remarry without proper prenuptial agreements or whose children are getting married without agreements of this kind.
Situations in which excessive caution in portfolios creates the risk that clients will run out of money.
Circumstances in which excessive concentration in one asset or asset class creates risk for client finances. This is especially true of business owners whose wealth is concentrated in their family business.
Cases in which one spouse in an aging-client couple is experiencing a decline in cognitive capacity.
Raise tough issues at the right time
The first step to raising sensitive issues is to pick the right time, when the client is most open to a conversation. This can be towards the end of a regular review in which things have generally gone well, so the client is feeling positive. It can also be during a lunch after a meeting or to celebrate the client’s birthday, when you’ve generated goodwill that you can tap into.
Events in the news can sometimes open the door to a conversation. When Sopranos star James Gandolfini passed away unexpectedly, there was considerable discussion in the media about the large taxes that were due on his estate and whether his affairs had been structured in a tax-efficient fashion. If you had been meeting with clients who resisted talking about estate plans, you could have used some of this media coverage to bring up the clients’ situation.
Here’s another example. Research shows that over half of wealthy Americans haven’t talked to their adult children about their finances. A New York Times article recently highlighted the confusion and cost that families can face when people pass away without having made their intentions clear. Articles like this one provide an opportunity to raise this issue with clients.
Raise tough issues in the right way
In raising contentious issues, set a tone for the conversation that is generally positive and conveys your concerns in a constructive fashion. Here’s one way that you could introduce the topic of a prenuptial agreement with a client who is getting remarried:
I’d like to bring something up that is causing me a bit of concern. I’m tremendously impressed by what you’ve achieved – building a successful business, your charitable activity, the values that you’ve instilled in your kids and the way they’ve become terrific adults. You have a huge amount to be proud of.
As your financial advisor and your friend, I want to raise a topic that could threaten the harmony and financial security within your family – and that’s your upcoming marriage without a proper prenuptial agreement. If you tell me this is none of my concern and want me to mind my own business, I will obviously respect that – but I wouldn’t feel right if I didn’t mention this.
At this point, sit back and allow your client to respond. As in any conversation, the key is to get the other party talking. The more clients talk in these kinds of discussions, the better the chances that the conversation will lead to a successful outcome.
Present possible solutions
If your client is open to talking about this issue, be ready with suggestions of possible solutions. Depending on the issue, this might entail a further meeting or tapping into other expert resources. Another option is to bring further information that you can review with the client at the meeting or send by email or mail afterward.
Let’s use the example of the client remarrying without a premarital agreement. One of these Wall Street Journal articles could be the jumping off point for further conversation:
I’ve written in the past about how important it is to end client meetings on a positive note. Here’s one way to conclude this conversation:
Let me say again how much I value our relationship. I do hope that this conversation won’t jeopardize our friendship and look forward to continuing to work together. And I just want to reiterate that if there’s ever an issue on which you’d like a sounding board, don’t hesitate to pick up the phone.
Just as every advisor and client relationship is unique, every elephant-in-the-room conversation will be different. But think of your clients and consider whether there are important issues that aren’t being talked about. By being proactive in raising important issues, no matter how sensitive, you’ll demonstrate your value and ultimately strengthen your relationships.
Dan Richards conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written commentaries, go to www.danrichards.com or here for his videos.
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