Prepare Or Repair?

Given the choice of addressing either an effect or a cause, a strategic thinker would always prefer the latter. A person constantly putting out fires without understanding the cause has a limited ability to control situations.

Yet I’ve observed that the majority of financial advisors seem to be highly reactive rather than proactive with most of the life transitions their clients will face. If you listened to them, you would think there are only a handful of life transitions to plan for, namely children’s college, retirement, home purchases and death. Not surprisingly, this thinking often reflects the products financial services manufacturers offer: insurance, savings vehicles and investments.

But as we all know, there is much more to life, and we ignore the other things at our peril.

Divorce is one obvious example of something we don’t prepare for. We also don’t prepare for a child getting married or empty nest syndrome, for aging parents, a child’s illness or a job loss. These challenges and life transitions can be put into a few categories:

Personal and family transitions: When a child gets married or goes to college, or a parent faces empty nest syndrome;

Health transitions: When we have to deal with aging parents, recent deaths or the illness of a child or spouse;

Work and career transitions: When we lose a job or when we sell a business or expand it;

Retirement transitions: When we fully retire, change residence, trigger distributions, etc.;

Financial transitions: When we experience a significant loss or gain—taking hold of an inheritance, for example, or refinancing a house;