Words are powerful. So much so that simple utterings can have a profound impact on generations and shape retirement in ways both good and bad. Two such challenging words that advisors hear from clients are “never” and “always.” Both expressions have found their way into many great quotes, movies and song titles, but are particularly powerful when incorporated in someone’s retirement plan. While these infinite terms are often used to protect and arm, they often result in a letdown and hold people hostage. 

My first advisor experience with the term “never” came when I met a widow who was stressed over her life savings. As I reviewed her portfolio, my first thought was that the advisor who set up this portfolio was definitely behind the times. She held several companies that were at one time valuable franchises, but over the years, had succumbed to competition and changes in technology. 

That’s when I discovered that her deceased husband had built the portfolio himself, based on companies he had either worked for or with which he had some affiliation. I was glad I hadn’t verbalized my initial thoughts, but knew I faced a big challenge when she told me that prior to her husband’s death, he had instructed her, “Never sell these companies.” It wasn’t his last breath or dying wish; it was simply his best investment advice before he passed away. During the 10 years since his passing, the companies saw several dividend cuts as well as slow but steady declines in share prices; meanwhile, her everyday expenses had definitely become a cause for concern.

Unfortunately, there are no financial ratios like P/Es or ROIs that can be quickly and easily applied to a sentimental valuation like this. From a purely financial perspective, the companies were absolute dogs that I would have liquidated in a heartbeat. However, the most critical component of a sentimental valuation is not what’s on paper but what’s in the client's heart and mind. In her eyes, liquidating those companies meant betraying her husband and his role in their relationship. 

For advisors trying to unwind a “never” conversation, it’s important to start the process by separating an investment’s value from the client’s values. That can be done by asking questions such as, “What do you think he/she would do with these companies if he were here today?” It’s a simple way to begin disconnecting the two parties involved. Along the same lines, asking additional character-based questions can add perspective that supports the need or opportunity to make changes:

By using the client's own words and descriptions about the deceased person, advisors can position the conversation toward solutions. “It sounds like Harold was a kind and thoughtful person who knew the value of money and people. His caring [or maybe "no nonsense"] approach really lends itself to this situation and figuring out where we go from here.” Questions like these are often helpful when husbands and fathers are no longer around, because men stereotypically assumed the role of “fixer,” and in many cases, that’s exactly what the survivor needs.  

Another key to defusing a sentimental valuation is to avoid creating a protagonist/antagonist situation. Don’t turn it into a competition between the deceased’s advice and your own. By asking questions, you can find paths that satisfy the need while making beneficial changes to a portfolio that no longer does what it was originally created to do. This technique not only affirms the deceased’s advice, but it also fulfills the advisor’s responsibility for the portfolio’s current performance. In my own case, I was careful to do just that. “Your husband did the right thing,” I told her. “At the time, he picked great companies to ensure you would be taken care of in case he was no longer around. I have the same goal for my wife and kids. Neither he nor anyone that worked for these companies could have predicted where things are now, 10 years later.” 

Advisors can adopt a similar line of reasoning by using the collapse of the dot.com and real estate bubbles, which most people never saw coming.

Therefore, the main point for any sentimental valuation is to acknowledge the client’s current emotions. After taking steps to affirm the situation, ease both parties’ value and responsibility, and find common ground for changing both their heart and mind. Then, and only then, does the financial stuff comes into play.

In my client’s situation, I wanted to be both empowering as well as sensitive to her situation, so we agreed to sell all but one share of each investment. By doing so, we were able to diversify her portfolio with a broader number of holdings, generate the additional income she needed, and keep the retirement promise she made to her husband. We didn’t sell all the stock in one fell swoop (in this case because they were in certificate form), but we sold a few at a time and had the remaining shares put in book entry so she could receive a statement each month as a means of tracking them. With each transfer, she grew more comfortable and felt empowered when the process was completed.

 

Similar to the the word “never,” its close cousin “always” also can stir both emotions and the money pot. I regularly face widows and widowers who break down when discussing their investments, situation and next steps. They become paralyzed over what to do because the person that said, “I’ll always be there for you,” is gone. The very person with whom they spent decades making decisions and mulling things over with is no longer available. Regardless of whether it was a parent or spouse … or if the death was expected after a long medical battle … or whether it was sudden … situations like these make it very difficult for spouses and family members to move on both personally and financially. 

In these situations, you are not only likely to have issues such as stocks mentioned above but physical investments as well, such as houses, boats, clothes, jewelry, motorcycles and cars, which can become problematic and burdensome to a surviving spouse or family members. I consistently see people imprison themselves financially by holding onto a house with a yard they can’t manage, or a boat that was going to be restored, an RV or car on which they are paying insurance and keeping in climate controlled storage.  Emotionally, things such as clothes, coats, tools, and medical equipment can lie around for years, slowing the grieving process and the acceptance of their new situation. The culprit is usually the dreaded phrase, “He/she always…”

Again, using questions and conversations to open a dialogue about the stress or burdens that often follows the death of a loved one can help them see their situation from a new perspective. Most couples never have the “after I die” financial conversation. There’s no, “Hey, honey, after the funeral, you’ll have to live on less Social Security and pension money, so dump the house and boat. I don’t want you to deal with that stress or burden.”

Therefore, advisors can help them see their solution by being empathetic. Share their emotions. Even if you didn’t have the opportunity to meet their lost loved one, saying, “From the outside looking in, it sounds like your spouse was a good person who wanted the best for you. I’m left to imagine he/she wouldn’t want you to feel stressed or burdened by this in any way.” 

When it comes to material goods and decision making, it’s also important to be resourceful. Pointing them toward a support group is a great option because they’ll find people who have gone through their exact situation; help them navigate the emotional components of losing a loved one, and offer advice on managing their possessions. 

One of the best things I ever did was attend widow and widower groups' support sessions. Initially, I was invited to answer financial questions, but soon learned a great deal about these individuals and how they dealt with their situations. Among their most common responses was, “I wish I hadn’t waited so long to get rid of …”  They talked fondly of selling or giving the items to people who would care for them in a way their loved one would be proud of and more important, they admitted that their memories are in the heart and mind, not their stuff.  A valuable lesson for everyone, particularly those facing a sentimental valuation and in need of ways to create an emotional legacy. 

Retirement planning that includes the terms “always” and “never” is a sensitive situation. When handled correctly, advisors can not only help a client financially but also mentally, socially, physically and spiritually. 

P.S.  let me know what you think of the article by leaving a comment or e-mailing me. 

Follow Robert Laura on Twitter @robertlaura. He is the president of SYNEGOS Financial group, co-founder of RetirementProject.org and author of Naked Retirement. He can be reached at [email protected].