Clients that have just come into new money—bequests, lottery jackpots, lawsuit settlements, among others—can provide a challenge for financial planners, but it’s up to advisors to anchor these clients and keep them stable, said speakers at the National Association of Personal Financial Advisors’ National Conference last week in
In fact, 70 percent of wealth transitions fail, meaning the client ends up not able to meet their financial goals, said
When people come into money, their identities can change; their careers and where they live can change; and their relationships can change, Rich said. “Our job as planners is to think about anchoring them.”
The change brings the challenge of any life transition, Lazarus said. And people have different emotional reactions. Some may go through an identity crisis, as the person’s old self dies to make way for the new self, she added. Some will go through the classic stages of grief, while others will struggle with class identity and their preconceived notions of what it means to be rich.
To help clients with this transition, advisors should first get a broad indication of their client’s decision-making approach before and after receiving the money, in order to get a sense of their new self, Rich said. Getting the client to draw a family genogram, or a family tree, can help the rep understand the client’s relationship with their family and the connection to money.
Rich also recommended advisors help clients understand their values about money and wealth. Give people time to understand their financial goals by putting a moratorium on the money. Advisors can also take the responsibility off the client by building their support team, which can include a therapist, a financial planner, a lawyer, an accountant, an insurance advisor, a trustee, a life coach and a wealth coach, Rich said.
Lastly, advisors can anchor the client by listening to them. Rich suggested using inviting statements, rather than questions, such as, ‘Tell me what’s on your agenda.’ If you do use questions, use open-ended questions rather than close-ended, and reflect back to the client what you’ve heard.