Life’s big moments move people to act—I call them “movable moments.” Investors tend to engage most with their finances when something big happens in their lives. But is that really the best time?
Think about these movable moments. Have you had clients come into your office with news that they have to retire earlier than they planned? Have you had a client recently contact you because they received an inheritance when a loved one passed away? Have clients asked you to speak to their lawyer about a pending divorce?
I suspect you answered “yes” to most of those questions. Some moments we can plan for and some are unexpected. But that’s why it is critical for advisors to proactively start these discussions before the issues surface.
An Advisor’s Value
For you as an advisor, this opportunity to educate clients starts with your value proposition—and it can be challenging to find the right words to describe it.
It may start with managing your clients’ money and their investment portfolios. But to differentiate yourself and your value, you have to think like your clients. And while you are thinking in terms of the markets, your clients are thinking about moments in their lives. About getting married, sending their children to college or buying their dream vacation home.
These days advisors often talk about moving up the “advice value stack.” Clients look to you for help navigating their life journey; at the foundational level, that means managing their money. But above and aligned to that, you are achieving their goals through financial planning. The next level in the stack is offering peace of mind, which brings advisors into the realm of empathy. Finally, at the top, is client fulfillment, which includes helping them accomplish their life’s purpose and leaving a legacy.
While there are many moments investors will face in their lifetimes, there are just a few that deserve proactive conversations and planning: relationships, unplanned retirement, health concerns and legacy plans.
Relationships
When someone gets married, or starts cohabitating with a partner, having the money talk is important. How will the couple share expenses and assets? Have they discussed sharing debt? What are the tax implications? Have they updated their beneficiary designations? Do they have a health-care proxy? (They often have to think about these things when they’re single, too!)
Remember that you are not just working with your clients, but also their adult children—either directly, indirectly or on their behalf—and the kids may not have considered these steps. Most advisors encourage intergenerational planning, but parents may not want to share details of their financial lives with their children. Not only does this make financial planning difficult, but it also prevents you from personally building relationships with their adult children—your potential future clients.
And for those who tie the knot or remarry later in life, there may be potential financial consequences that many couples have not considered. In 2018, the Pew Research Center said almost one quarter of all married people have been married before. The process is challenging both for couples bringing their financial lives together—and for those couples decoupling their assets in a divorce. Many people mistakenly assume that obtaining legal counsel is enough when going through a divorce, but advisors can provide the financial knowledge needed when making lifelong, legally binding decisions.
Consider Social Security benefits. For example, while many married couples know that one spouse can potentially claim a benefit equal to half of the other’s Social Security retirement benefit, many divorced couples are unaware of similar rules that could apply to them. And if they marry again? Getting remarried after a divorce generally means that you lose whatever benefit you may have been eligible for from your former spouse. In addition to understanding how divorce can impact benefits, there may be simple strategies you can consider to help clients mitigate the impact of taxes when splitting assets.