How Advisers Can Help Clients Deal With Financial Stressors

As clients’ financial stress builds—due to personal reasons or in reaction to an increasingly volatile stock market—advisers working with individuals report spending more of their time addressing those clients’ emotional needs. Ameriprise’s August survey of 257 advisers found that respondents reported spending at least half of their client conversations on non-financial themes, with an average of 27% of the time spent discussing personal life events and 23% on emotional support and guidance.

For some retirement plan advisers, improving clients’ financial wellness may first require dealing with unaddressed emotions. The Wealth Enhancement Group’s September survey of 2,000 adults found that 44% of respondents had avoided checking a financial account due to stress or fear.

A Savvi Financial poll of 604 workers conducted in September found that, although roughly half of respondents reported more financial stress than a year ago, 34% said they had not reviewed or updated their tax withholdings in more than a year, and 32% said they had never reviewed their direct deposit splits. Uncertainty about workplace benefits can lead to employees underutilizing employer-provided resources, which Savvi called “silent paycheck waste.”

Even optimistic feelings about finances do not guarantee action. Prudential Financial’s August global retirement pulse survey of mass affluent individuals uncovered a “confidence paradox”: While 87% of respondents in Brazil, Japan, Mexico and the U.S. said they felt confident that they would cover essential retirement expenses, only 41% reported working with a financial adviser. Fewer than one-third of respondents said they had a written retirement plan, and only one-quarter had a clear withdrawal strategy.

“There’s a feeling of [retirement] readiness, but that’s so different from knowing,” says Mary Kay Sloan, a Prudential financial adviser. “The knowing is what brings peace of mind.”

Job Requirement: Focusing on Emotional Needs

Asked what non-financial skills are needed for the job, 79% of surveyed advisers chose the ability to be a trusted confidant, 41% cited emotional support, and 40% chose life coaching skills.

Brian Mora, Ameriprise Financial’s head of experienced adviser recruiting, says building rapport, asking questions, and active listening with clients have been important skills throughout his entire 25-year career, but colleagues today view them as more relevant than ever.

“It can be a differentiator,” Mora says. “These are interpersonal skills that, even if we provide training to advisers and they go to courses, everybody does it differently.”

Phil Kerkel, a partner in Capco’s wealth and asset management practice, agrees that soft skills are crucial for advisers—and many are already inclined to use them.

“If you don’t have the soft skills, you’re probably not in that client service business, dealing with families and individuals; you’re probably a portfolio manager that deals with institutional assets,” Kerkel says. “If your day-to-day is serving individuals and serving high-net-worth families, you’re invested in their success.”

Goal Setting, Goal Adjusting

Mora recommends that advisers set a “purposeful agenda” when they meet with clients. Rather than immediately jumping into business, an adviser can plan out a few personal questions to see how a client has been doing. Mora has also seen advisers work in pairs, to ensure that one is focusing on active listening and asking engaging questions.

If clients are reluctant to engage with financial topics, Kerkel recommends asking about personal goals. The conversation can switch from investments and returns to tangible milestones and how they could be financially attainable.

“[Ask] ‘Do you plan on buying a house? Do you plan on getting married? When do you plan on retiring?’” Kerkel says. “Then come back to them with a financial plan that makes sense, [one] that aligns to their objectives.”

In the Ameriprise survey, nearly half (48%) of advisers said it is necessary to know how to facilitate hard or candid conversations. Pre-retirees often share regret over their lack of retirement planning or preparedness, but Sloan says advisers can reassure clients that seeking help is a positive first step, and situations can change by small increments.

“You sit down [and tell the client]: ‘This is where you are today. Let’s work toward where you want to be,’” Sloan says.

Mora agrees that breaking down larger goals into “bite-sized pieces” and figuring out action plans of monthly, quarterly or yearly steps are the “essence of financial planning.” If clients are falling short of retirement goals, the adviser can help them figure out if the best course of action is to save more money, push back the time horizon or lower the amount of money needed in retirement.

“Keep the client grounded in reality while still acknowledging their feelings and empathizing with how they feel,” Mora says.

Facing the Truth

Life expectancy can be another difficult topic for advisers and clients. Many retirement plans use an investment time horizon that stretches to age 90 and beyond, but in-house mortality calculators used by insurance companies could determine that a client’s expected lifespan is shorter.

Kerkel says when Capco did a sentiment study to see whether advisers wanted life expectancy calculators included in their planning, respondents were either highly interested or highly disinterested, “and not a lot in between.” Kerkel has not entered his own data into such a calculator, but says anecdotally that he has seen colleagues, especially younger ones, appreciate how adjusting life expectancy could potentially change their strategy.

“That changes my entire forecast of my financial future,” Kerkel says. “Maybe, instead of retiring at 65, I could retire at 60 and have five more years to really enjoy.”

No matter the topic, interpersonal skills can help advisers connect and sympathize with clients, while guiding them to choose better financial options.

“Your job is to tell them the truth, just like a medical provider,” Mora says. “If there’s information that’s not favorable, you do it in a way that’s not making the client feel bad, but you have to tell the truth.”