MONEY Financial Planning

4 Things You Need to Change Your Career

Want to change your career or launch a new business? A financial planner explains the four things you need.

A few years ago a client, Peter, came to me and said, “I’m doing all the work, but my boss is making all the money. I could do this on my own, my way, and make a whole lot more.”

Peter was an instructor at an acting studio. He was working long hours for someone else, knew the business inside and out, and felt stuck. He wanted a change.

We talked through his dilemma. Peter wanted to know what he needed to do to venture out on his own and start his own acting academy.

Many of us find ourselves daydreaming about making such a bold life change, but few of us do it. So what is stopping us from taking the leap? Why don’t we have the courage to invest in ourselves?

Peter and his wife, Jeannie, sat down with me to chart out a plan. We determined that they needed four major boxes to be checked for Peter’s dream business to have a real shot at success:

  1. Support from the spouse
  2. Cash reserves
  3. A business plan
  4. Courage to take the leap

Let me break these down:

1. Support from the spouse: Peter and Jeannie had to be in full agreement that they were both ready to take on this new adventure together. In the beginning, they would have significant upfront investments in staffing, infrastructure, and signing a lease for the business. Money would be tight.

2. Cash reserves: Peter was concerned. “How much money can we free up for the startup costs?” he asked. We discussed the couple’s financial concerns, reviewed financial goals for their family, and acknowledged the trade-offs and sacrifices they would need to make. We determined a figure they were comfortable investing in their new business. Then we built a business plan around that number.

3. Business plan: It has been said that a goal without a plan is just a wish. Peter and Jeannie needed a written plan in place so that their wish could become a reality. Their business plan would serve as a step-by-step guide to building and growing the acting academy. It included projections for revenues, expenses, marketing strategies, and one-time costs.

Once we wrote the business plan, we had one final step remaining: the step that so many of us don’t have the courage to take. Peter and Jeannie had to trust in themselves, believe in their plan, and…

4. Take the Leap: Regardless of how confident we are, how prepared we feel, and how much support we have, this is a scary step. We have to walk away from our reliable paycheck, go down an unfamiliar road, and head out into the unknown.

I’m happy to share that Peter and Jeannie’s story is one of great success. They faced obstacles and bumps along the way, but Peter persevered and succeeded in accomplishing his goal. He is now running a thriving acting academy with multiple instructors and a growing staff. If you decide to invest in yourself, you will need to take the four steps too.

———-

Joe O’Boyle is a financial adviser with Voya Financial Advisors. Based in Beverly Hills, Calif., O’Boyle provides personalized, full service financial and retirement planning to individual and corporate clients. O’Boyle focuses on the entertainment, legal and medical industries, with a particular interest in educating Gen Xers and Millennials about the benefits of early retirement planning.

MONEY Love and Money

11 Financial Clues That Your Spouse Wants a Divorce

torn dollar bill
Getty Images

Certain changes in financial behavior and conversations about money are sure-fire signs that your spouse is preparing to split up.

Over 25 years, I’ve worked on the financial aspects of more than 1,300 cases of divorce. Rarely are both spouses in sync when it comes to filing; one spouse is usually laying the groundwork before the other.

In hindsight, most people on the receiving end of the filing have their “aha!” moment. One homemaker told me that her husband began plying her with gifts and vacations; he also launched all kinds of projects to fix up their house so they could sell it and move to a smaller place. It was all totally unsolicited, much appreciated, and done with loving attention.

Six months into all this thoughtful behavior — as the the couple closed on their new vacation timeshare, downsized to a beautiful condo, and planned for their next vacation — he popped the zinger one Saturday morning: “I want a divorce.”

For another client, the signs were a little more obvious: The bank called her husband to let him know that his mortgage was approved — the mortgage he was co-signing with his girlfriend.

Divorce is an emotional, legal, and financial combat zone. There are actually websites devoted to secretly planning for divorce, in order to “win” the best one possible. Divorces can have win-lose, win-win, or lose-lose outcomes. Preparation helps your case. And the earlier you recognize that divorce is imminent, the better you’ll be able to prepare.

Over the years, I have come up with a list of sure-fire financial indicators that your spouse is heading toward divorce. Changes in behavior about money — some subtle, some not — can be tell-tale signs of a split in the offing.

Most of the time, changes in financial behavior accompany classic non-money signs of marital trouble: lack of communication, stress, physical separation, arguments, and isolation. But it helps to be on the lookout for financial signs on their own. And here’s a good list:

Your spouse…

  1. Argues about money.
  2. Seems to be hiding money.
  3. Has no explanation for why money is missing.
  4. Has stopped direct deposits to your joint bank account.
  5. Puts you on a budget and demands an accounting of all of your spending.
  6. Makes large cash withdrawals.
  7. Pays for his/her own credit card bills — or better yet, has his/her mail sent to the office.
  8. Goes on more business trips than usual and has greater travel and entertainment expenses.
  9. Blindsides you with gifts and trips.
  10. Reduces contributions to savings or retirement. Excess cash is now spent or socked away somewhere else.
  11. Takes out loans because it is a “smart” financial decision during times of low interest rates.

Along with these changed behaviors, there’s a whole other set of red flags to look out for: a noticeable turn for the worse in how your spouse talks about his or her earnings, workplace achievements, or business prospects. He or she starts complaining a lot about money — how business is bad, how jobs are at risk, how this year’s bonus is in doubt.

If your spouse is suddenly and remarkably gloomy about his or her ability to make money, this might be premeditated strategy to lower your financial expectations in a divorce. Attorneys even have a name for it: RAIDS, for “recently acquired income deficiency syndrome.”

On the bright side, if you are familiar with your spouse’s business, customers, and performance reviews, it will be hard for your spouse to paint a credible picture of unexpected gloom. So keep your eyes set on financial reality and do your homework if your spouse complains in detail about the following:

  1. His/her earnings potential is at its peak and is at risk.
  2. Bonuses are reduced or nonexistent.
  3. Company layoffs are imminent or overdue.
  4. The employer has declining revenues and sales.
  5. Clients are deserting the company.
  6. His/her sales territory has been cut despite solid job performance.
  7. It’s the economy, stupid!
  8. His/her age is a negative factor in the business, and he/she is at risk of being fired for being too old.
  9. Our family spending is rampant and unsustainable with probable loss of income or job.

If you start hearing these complaints, it’s time to organize your financial wits and get a handle on your financial lifestyle. If you’re surprised to have a spouse who seems to be premeditating divorce, empower yourself and hire a divorce financial planner. A divorce financial planner will cut through your emotional tangles to track your financial issues and provide a foundation for you to advocate your needs, when and if you should hire an attorney.

———-

Vasileff received the Association of Divorce Financial Planners’ 2013 Pioneering Award for her public advocacy and outstanding leadership in the field of divorce financial planning. Vasileff is president emeritus of the ADFP and is a member of NAPFA, FPA, and IACP. She is president and founder of Divorce and Money Matters, serving clients nationwide from Greenwich, Conn. Her website is http://www.divorcematters.com.

 

MONEY Financial Planning

The Real Risks of Retirement

150317_RET_RealRisk_1
Walker and Walker/Getty Images

Acknowledging all the financial risks you face in retirement can be an empowering experience.

When you’re planning for retirement, you think about how much money you’ll spend, places you’d like to visit, what health care will cost. But do you think about risk? And do you think about the right risks?

By that, I mean, have you considered any risk other than running out of money?

There are other risks to face.

No generation before today, for one, has ever looked at such a long retirement with largely themselves alone to rely on.

And we’ve seen two market crashes in a decade — 2000 and 2008 — only to raise our heads up and go through a global economic slowdown. Thanks a lot. What’s next?

Some risks you can actually control, however.

You can’t predict where the markets will be be six or 12 months from now. But you can tell yourself you’re going to get a handle on the other things that have as much of an impact on your retirement as your portfolio’s performance.

These are non-market risks that often arise within your own household.

Here’s my list of the special risks faced by current and future retirees:

  • Living a very, very, very long life
  • Having too much of your wealth in your house
  • Not saving enough
  • Having to take care of your parents
  • Having to support your adult children
  • Paying oversized college costs
  • Not having control of your budget
  • Forgetting about inflation
  • Persistently low returns in the markets and low interest rates
  • Ultra-volatile market swings just as you stop working

Oh, and, timing. All of these things could happen around the same time.

A silly little step you can take toward addressing these risks is to drop the word “risks” and substitute “issues.” If these are “issues,” maybe someone can do something about them. Maybe that person is you.

I find that some clients don’t realize that they themselves are the ones who determine that their financial plan won’t work. Hoping that your portfolio grows to the sky so it can support you isn’t really much of a defense against overspending. Overspending is something you control.

Or maybe it’s not you. Having your elderly parents to take care of, to worry about, to help financially, is not exactly a choice.

But when you factor something like caring for an elderly parent into your retirement plan, you can start to walk around this issue, take its measure, and begin to see ways to cope. Or begin to see that you can’t cope with this responsibility. You may have to find other resources — speak to other family members, seek out public programs, look for nonprofit groups that help with such things as respite care.

Coping with the issue can mean raising your hand, saying you can’t really handle it all, and asking for help.

Or it can mean that you did your research and you didn’t find a solution for every conundrum. Coping with the issue can mean you realize it’s a pothole and you’re going to hit it.

Okay, so you might live to be 100 or close to it. Did you set a portion of your portfolio aside for very long-term growth? Or did you consider delaying Social Security benefits until age 70 — and by doing that, pump up your check for the rest of your life, no matter how long?

Or, let’s say you figure you will have to live with low returns for a long while. Have you allocated enough to cash or short-term investments to handle your spending needs? Or did you divide your portfolio into buckets for different purposes? And then did you come up with an income strategy for one bucket so that you don’t have to dip into your other buckets?

When you strategize like this in the face of risk, it’s easier to see the actions you can take, even if you can’t make the risk go away.

As financial planners, we don’t often discuss these non-market risks. The one risk we do talk about with clients all the time is market risk, because we know quite a bit about that. Markets are difficult and ever-changing. While that may seem impenetrable to the client, it doesn’t really intimidate us.

But the real risks to the client’s retirement? Many of them lie out there, beyond investments. They may be outside a financial adviser’s perfectly organized financial plan, but they still exist. And clients have to steer around them.

———-

Harriet J. Brackey, CFP, is the co-chief investment officer of GSK Wealth Advisors, a South Florida registered investment advisory firm that manages more than $330 million. She does financial planning for clients and manages their portfolios. Before going into the financial services industry, she was an award-winning journalist who covered Wall Street. Her background includes stints at Business Week, USA Today, The Miami Herald and Nightly Business Report.

MONEY College

Don’t Be Too Generous With College Money: One Financial Adviser’s Story

When torn between paying for a child's education or saving for retirement, parents should save for themselves. Here's why.

Saving money isn’t as easy — or as straightforward — as it used to be. Often, people find they have to delay retirement and work longer to reach their financial goals. In fact, one of the most common issues parents face these days is how to save for both retirement and a child’s college fund.

Last month, for example, I met with a couple who wanted to open college savings funds for each of their three children. They were already contributing the maximums to their 401(k)s with employer matches. I applauded their financial foresight; it’s great to see people thinking ahead.

Then I gave them my honest, professional opinion: Putting a lot of money into college funds isn’t going to help if their retirement savings suffer as a result. Sure, they’ll have an easier time paying tuition in the short term, but down the road their kids may end up having to support them — right when they should be saving for their own retirement.

The tug-of-war between clients’ retirement and their children’s education can lead to difficult conversations with clients, and difficult conversations between clients and their children. Who wants to deprive their children of their dreams and of their top-choice school?

I try to be matter-of-fact with my clients about this sensitive subject. I start with data: If you have x amount of money and you need to put y amount away for your own retirement, you only have z amount left over for your children’s college.

I also talk a little about my own experience — how my parents were able to write a check for my college tuition. But college was less expensive then, and costs were a much smaller percentage of their salary than they would be today. Times have changed.

As much as we all want to be friends with our children, we have to put that aside. I tell people that if they don’t know whether they should put their money in a 529 account or their retirement account, they should put it in their retirement account. Financial planners commonly point out that you can get a loan for college but you can’t get one for retirement.

I don’t think people realize that. I think that they just want to do right by their children.

After I talk about my own experience, I move on to my recommendation. I tell clients that one way to approach this issue with their children is to make them partners in this venture. Tell them that you’re going to pay a portion of the cost of education. Set a budget for what you can afford, then work with them to find a way to fill in the gaps. Make a commitment, then stick to it.

I explain to my clients that choosing their retirement doesn’t mean that they can’t help your children financially and it doesn’t mean they are being a bad parent or are being selfish. It does mean that they should prioritize saving for retirement.

When clients tell me that they feel guilty for putting their retirement first, I ask them this: “Where is the benefit in saving for your children’s college but not for your own retirement?” Without a substantial nest egg, I tell them, you could end up being a burden on your children when you’re older.

And there’s an added bonus, I tell them: If your kids see you putting your retirement first, it might teach them about the importance of saving for their own retirement. That could end up being the best payoff of all.

Read Next: Don’t Save for College If It Means Wrecking Your Retirement

———-

Sally Brandon is vice president of client services for Rebalance IRA, a retirement-focused investment advisory firm with almost $250 million of assets under management. In this role, she manages a wide range of retirement investing needs for over 350 clients. Sally earned her BA from UCLA and an MBA from USC.

MONEY Credit

Your Genes Might Affect Your Credit Score

150311_FF_DNAMoney
Jon Boyes—Getty Images

Your credit score isn't controlled by any one cause, but your genes may be a key factor.

There is the standard list of factors that influence your credit score: payment history, outstanding balances, the types of credit that you use and so on. But what you probably don’t realize is that your genes may also play an important role. Yes, your biological wiring might make you more likely to be more risk-seeking and take on more debt, which could lead to a lower FICO score.

I came across this intriguing discovery while researching my book Coined: The Rich Life of Money And How Its History Has Shaped Us. I wrote the book because I was working at a Wall Street investment bank during the credit crisis, and I wanted to know what leads people to make bad decisions with money. I learned that there are many things that guide our financial decisions, including our genes.

To understand how genes could sway our decisions, I asked a neuroeconomist. Neuroeconomics is an emerging and interdisciplinary field in which brain scans and other technologies are used to understand how we make financial decisions. Brian Knutson, a neuroeconomist at Stanford University, explained a study that he conducted with two colleagues, Camelia Kuhnen and Gregory Samanez-Larkin, on the link between our genes, financial decisions and even life outcomes.

They started with the multi-part question, “Do genes influence cognitive abilities, do they shape the way people learn in financial markets, or do they determine risk attitudes?” They concentrated on a gene known as 5-HTTLPR because it had been identified in previous studies as playing a role in how we make financial decisions. Specifically, they wanted to know whether there was causation between people who have a variant of this gene, possessing a short or long allele, and their financial outcome.

In the trial, they selected 60 individuals from San Francisco to participate. The participants shared demographic information such as their age, marital status and ethnicity. They also provided personal financial information such as their occupation, income level and debts. Some participants also disclosed their FICO scores. All participants had their DNA collected via cheek swabs for an analysis of whether they possessed the short or long alleles. Participants were then presented a series of financial decisions like how to allocate $10,000 across stocks, bonds and cash.

It turned out that those with short alleles made more conservative financial decisions than those with long alleles. Participants with short alleles allocated less money in equities and more in low-performing assets like cash. Moreover, in real life these participants had fewer lines of credit than the others. Those with two short alleles had higher FICO scores, some 93 points, than those with a long allele. FICO scores typically range between 300 and 850, so a swing of 93 points, or 17%, is statistically noteworthy.

Before concluding that genes were the reason for the variance in behavior, the researchers considered other possible factors: income, wealth and financial literacy. But they didn’t find that any of these things were meaningful in explaining the outcome of their study. Ultimately, they settled, “Overall, these results indicate that individual variation in the 5-HTTLPR genotype influences financial choice.”

Their conclusion is in line with other academic studies that find there are genetic determinants for financial decisions. For example, researchers compared the investment portfolios of fraternal and identical twins. They found that almost one third of the divergence in asset allocation might be attributable to genetic factors. Indeed, twins that were frequently in touch invested in a similar manner. But identical twins who grew up separately also demonstrated similar financial decisions. The researchers explain, “We attribute the genetic component of asset allocation—the relative amount invested in equities and the portfolio volatility—to genetic variation in risk preferences.”

However, Knutson and his colleagues sound a cautionary note: not all participants acted in accordance with how their genes might predict. Just because several studies reveal that genes appear to play a role in determining the financial decisions, doesn’t mean that they are the only things that matter. Even if someone is biologically wired to be risk-averse, they might demonstrate risk-seeking behavior depending on the situation. For example, say someone in her late 20s who is predisposed to risk aversion is setting up a retirement account. She has also taken two online courses that recommend more aggressive investing early in one’s career, so she decides to be more risk-seeking, and invests more money in stocks than bonds. In this case, knowledge triumphed over genetics.

That genes can influence our credit scores is an intriguing finding of neuroeconomics. Maybe one day, credit reports won’t just outline our borrowing and repayment history but how it deviates from expected behavior based on our genes.

More from Credit.com

This article originally appeared on Credit.com.

MONEY financial advice

What Every Investor Should Know About Schwab’s “Free” New Advice Service

Charles Schwab logo on window
Paul Sakuma—AP

Robo-Chuck Has Landed! Do you want this free new online service to design your portfolio?

A new group of financial websites has been making investment advice cheaper and cheaper. Now the brokerage and mutual funds giant Charles Schwab is getting into the game, with a new online service called Intelligent Portfolios that can design a portfolio for you without charging any fee at all. You’ll need only $5,000 to open an account. But, as you might well have guessed, there’s an asterisk on that “free” price tag.

We’ll get to the asterisk in a moment. First, here’s why Schwab’s entry into online advice is such a big deal.

Every financial firm in America is fighting to offer investment advice to the middle-class, especially about what to do with their IRAs and rollovers from 401(k) retirement accounts. But the cost of getting a financial pro to sit down and help you design a personalized portfolio of stocks, bonds, and funds is often high—think 1% of assets per year or more—and the minimum required investment can be forbiddingly steep.

New web-based companies like Betterment, Wealthfront, and FutureAdvisor have lately been chipping away at this model. They don’t let you talk to a person. Instead, you go to their sites to answer questions about your age, financial position, and how much risk you are willing to take, and computer models generate a portfolio of stock and bond exchange-traded funds (ETFs). These “robo-advisers” often charge investors razor thin fees of 0.2% to 0.5% of assets per year, with low (or no) minimum investments.

The investment advice robo-advisers give isn’t terribly complicated. But for most people, that’s a good thing. You typically end up in a handful of broadly diversified index funds, which you buy and hold for the long run. This service can be a simple entry point to investing for those who don’t know how or where to get started, and they can automate chores like annual rebalancing and adjusting your mix as you age. And, again, they are cheap.

And yet, Schwab’s new version appears to undercut even the other robo-advisers’ slender fees by charging nothing.

Does that make it a sure winner? Not necessarily. As with all such programs, you have to take a look under the hood.

In addition to whatever investors pay for online financial advice, they also have to pay the fees of the underlying funds. The robo-advisers Schwab will compete with don’t offer their own mutual funds, but instead typically rely on Vanguard and iShares products. Those are very cheap funds that usually charge less than 0.2% of assets per year, so the net cost of investing with an online adviser stays low.

Schwab’s approach looks a little different. While Schwab is offering its investment strategy gratis, the company has said it plans to recommend some of its own funds, as well as third-party funds.

Schwab hasn’t made clear specifically what ETFs it plans to use with Intelligent Portfolios. Schwab spokesman Michael Cianfrocca told MONEY the investment strategies it uses “have nothing to do with generating revenue for the firm.” But a quick glance at the kinds of portfolios it recommends suggests that some of its underlying investment will be relatively costly.

For instance, Schwab appears to make liberal use of “fundamental” index funds. Some investors think this type of index fund, which tends to tilt its weightings toward value-priced stocks, may outperform the market in the long-run. But fundamental index funds are pricier than plain-vanilla stock index funds, which simply hold stocks in proportion to their market value. Schwab’s fundamental large-company stock fund charges investors a fee of 0.32% of invested assets annually compared to just 0.04% for the plain-vanilla index funds the company offers. (A 0.32% fee is still low compared to actively managed funds.)

Schwab also stands to earn money from investors’ cash positions, since they will be held in Schwab cash vehicles, which Schwab makes money on by collecting a spread between what it earns reinvesting the money and what it pays out to Schwab customers. In one scenario, for an investor in his or her 40s with a moderate risk appetite, the Schwab product recommended putting nearly 9% of the money into cash. The Schwab spokesman said that was typical for other types of accounts housed at Schwab. But it’s far more cash than some other investment managers recommend. To take one example: The Vanguard target-date fund designed for a similarly-aged investor would put less than 1% in cash.

In the long run, Schwab’s new product may prove a convenient tool for some investors. But don’t assume you’re getting something for nothing.

MONEY

Keeping Calm When the Market Goes South

150305_INV_KEEPCALM
iStock

A financial adviser shares tips for easing anxiety in a rollercoaster market.

“It’s been too good for too long,” my client said.

She had every right to feel suspicious. With the markets appearing to be at an all-time high, she was justified in having that waiting-for-the-other-shoe-to-drop instinct. I understood her desire to tread cautiously.

The majority of baby boomers are at a crossroad in their lives: They want to retire, they should retire, and it’s time to retire. But they are extremely nervous nowadays about the markets’ record-breaking levels.

Over my many years of experience working with clients in this situation — they’re ready to retire, but they can’t quite pull the trigger — I’ve seen how scary it can be to make that potentially irrevocable decision. What if markets go down? Should they have waited? What if this, what if that?

It is human nature to question ourselves at times like these, but then again, times are always a bit uncertain.

I have found that the most important step in keeping clients calm in a volatile market is to have an investment education meeting regarding their risk level and market volatility at the start of our working relationship and routinely thereafter. Our clients are actively involved in assessing their own risk tolerance and choosing a portfolio objective that suits their long-term goals.

We also want to set the right expectation of our management so our clients know that we never sell out of the market just because things are starting to go bad. Market timing has not proven to be a successful growth strategy, which is why we work with our clients upfront to establish a portfolio and game plan they can live with.

Unfortunately, the inevitable will happen: The markets will go south, and clients will panic. How can financial planners ease clients’ anxiety? Here are a few suggestions:

  • Discuss defensive tactics. Show clients the dollar amounts they have in bonds and other fixed income. Translate that into the number of years’ worth of personal spending that is not in the stock market. Have an honest conversation about if that number will be enough over the long-term.
  • Leave emotion out of it. Talk to them about the danger of selling at the wrong time and illustrate how emotional decisions tend to do more harm than good. Remind them of how quickly markets can turn around after a big drop. It’s been known to happen on more than one occasion, so share your knowledge of these experiences. Let them know that you don’t want them to miss the upside.
  • Look at the positives. Reinvesting dividends and capital gains? Are clients making monthly contributions to a 401(k) or other investment accounts? Remind your clients that when markets are down they are buying at lower prices, which can work well for their strategy over the longer term. A down market also often makes investing easier and less frightening to buy, so that might be the time to purchase any equities they once worried were too expensive.

The markets will always have some level of volatility. As an adviser providing regular guidance and support, you want to do everything you can to help clients not overreact to the daily news, hard as it might be. Urge them to continue to think long-term. It may not always be easy to see, but today’s bad news may just be a client’s big buy opportunity, and they won’t want to miss that!

———-

Marilyn Plum, CFP, is director of portfolio management and co-owner of Ballou Plum Wealth Advisors, a registered investment adviser in Lafayette, Calif. She is also a registered representative with LPL Financial. With over 30 years of experience in the financial advisory business, Plum is well-known for financial planning expertise and client education on wealth preservation, retirement, and portfolio management.

MONEY Aging

Handling Family Finances When Dad Is Losing His Grip

family of piggy banks
Sean McDermid/Getty Images

When the person in charge of family finances has dementia or Alzheimer's disease, a difficult transition is required.

A client’s daughter told me recently that she was beginning to notice her father having difficulties with memory and comprehension.

I had known that her father’s health had deteriorated somewhat, but he still seemed relatively sharp mentally up until the last conversation I’d had with him, around Christmas time.

The client’s wife has never been very involved in the family finances, and his son lives out of town. The daughter has been playing caretaker for some time. Now it seemed we needed to have a more in-depth conversation with everyone involved regarding family finances, longevity and what happens after the patriarch has passed away or can’t function as financial head of the household.

The loss of a loved one is unbearable, but far worse is losing a loved one to cognitive conditions such as Alzheimer’s disease or dementia. These decisions may cause personality changes. In some cases, a client may become belligerent or paranoid, especially when dealing with financial issues.

It is always preferable to have a client himself or herself acknowledge that something is wrong, but this may not always be the case. For this reason, financial advisers need to have a plan in place to address situations such as this one.

The first step is to get the family involved. Most of the time, the spouse or children will already be aware of the issue.

In this particular case, I could not discuss financial details with the daughter without a financial power of attorney. Fortunately, we were able to schedule a time for father, mother and daughter to meet and discuss family finances.

What if someone refuses to admit that he is losing his mental acuity? We dealt with this a few years back with another client. He was going through a divorce at the time — a process which may have either contributed to, or resulted from, his mental decline. We ended up being a part of an intervention involving the client, his children, his business partner and his pastor. The pastor referred him to a psychiatrist; luckily, the client pursued treatment that helped.

The key to handling many of these situations is having a ready stable of referable professionals in all aspects of life. In addition to the colleagues we deal with on a regular basis, such as lawyers and accountants, it is helpful to have contacts in the arenas of medicine and psychology.

Solid and consistent documentation is a standard in our industry, but it becomes absolutely imperative when dealing with cognitively questionable clients. Keeping communication records protects everyone involved and can go a long way to explaining client actions to family members if they are unaware of the problem.

Things don’t always go so smoothly. In some situations, you must fire the client. We have had to have these tough conversations in the past. It would be nice to say that we are always able to help facilitate a changing of the guard, but many of these personality issues are beyond our control. When cutting ties, it is important to do it with an in-person meeting. We’re honor-bound to do what’s best for the client, but it is also important to protect our practice. If we are unable to make progress, it may be best for clients to find someone who can better help them.

I’m very thankful the daughter came to me, rather than my having to reach out and have what could have been an unpleasant conversation. At this point we have now gathered financial powers of attorney and reviewed updated wills and trusts, coordinating with the family attorney. The mother and daughter are much more aware of the family financial situation and are not nearly as fearful about the future. I expect the daughter will take a more active role in the management of the family’s finances. We want to make sure that everyone involved is aware of, and on board with, the transition.

———-

Joe Franklin, CFP, is founder and president of Franklin Wealth Management, a registered investment advisory firm in Hixson, Tenn. A 20-year industry veteran, he also writes the Franklin Backstage Pass blog. Franklin Wealth Management provides innovative advice for business-minded professionals, with a focus on intergenerational planning.

Your browser is out of date. Please update your browser at http://update.microsoft.com