Updated Tuesday, July 22, 2014 as of 5:34 PM ET
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Divorce & Widowhood: How Advisors Can Help
Fidelity Institutional Wealth Services
Thursday, March 27, 2014
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The end of a marriage or loss of a spouse is a uniquely stressful situation for both husbands and wives. But some wives may face an additional challenge -- being the sole financial decision-maker for the first time.

With an estimated $2 trillion "in motion" due to divorce or widowhood among American women, a thorough understanding of such major transitional moments may help financial advisors protect and even expand their practices.

Here are some strategies for helping women address the financial issues associated with divorce or loss of a spouse. Use these to better serve your clients, retain them as they undergo a pivotal life transition, and ultimately help grow your business.

1. LISTEN, EDUCATE & COACH

Advisors who've been successful maintaining female client relationships after divorce or the death of a spouse use "softer skills" to listen, educate and empathize. In this way, they empower clients to rebuild their lives and make informed financial decisions.

Debbie Riney Smith, a private wealth advisor and senior VP at SunTrust Investment Services' Wellborn Group in Atlanta, places a premium on listening to her female clients' lifestyle needs and concerns. She lets them lead the conversation and checks in with them monthly, she says.

Riney Smith makes a point of starting client meetings with questions like "What's on your mind these days?" "What concerns do you have?" and "What do you want to cover today?"

Letting the client lead is an approach shared by Russ Thornton of Atlanta's Wealthcare Capital Management. "Talking is the key with all clients -- but especially with women making these kinds of transitions." He emphasizes first helping women identify their priorities, concerns, and goals and then walking them through the trade-offs of the decisions they need to make.

Women who haven't been involved in managing family finances can face a steep learning curve, says Colleen Chandler, managing director of VennWell in Lake Forest, Ill. "We're helping women make it through a crash course in personal finance, investment, tax, and estate planning -- all while navigating through a highly emotional time in their lives," she says. "Educating our clients is critical, as well as coaching them on how to be effective communicators."

That can even include role-playing. "It's crucial to prepare our clients for important conversations with a spouse or with their attorneys," says Chandler. "In many cases, it's their first experience having such a conversation -- and they are often pleasantly surprised that they not only can do it, but do it successfully."

Get started: Listen, educate and empathize with your female clients in transition to ultimately empower their lives. Coach them in speaking to their husbands for the first time about money. Start the process one step at a time, with one client at a time.

2. TEACH INVESTMENT BASICS

Advisors know the importance of explaining reasons for investment choices and how the amount of risk inherent in these decisions can impact clients' future. These conversations may be particularly important for female clients in a transition, particularly if they haven't taken a lead role in discussing investing strategy.

Once a financial plan and investment strategy are in place, Thornton keeps clients informed. He mitigates their worries by stress testing the financial plan using realistic market and economic cycles, watching for client underspending (which he says is common), staying connected (with a high-touch, high-frequency approach to communication) and helping clients think about the purpose of their money.

When speaking to a widow who is uncertain or hesitant about putting her inherited wealth into use, Thornton asks, "What's it for?" Sometimes he suggests they honor the memory of their husbands through charitable giving -- a strategy he says can get a client comfortable with thinking about the money as her money and the choices as her choices.

  • Get started: Consider proactively explaining why you choose specific investments. Expect to further explain why you still like them, even when markets are volatile. Consider showing them how big a drop their portfolios can withstand, so clients understand how they're prepared. It may also be helpful to demonstrate over time how a client's investments are progressing against her long-term plans.

3. LEARN DIVORCE PROCESSES

Effectively serving clients going through a divorce requires an understanding of the separation and divorce process. For high-net-worth clients, you also need to understand an array of complex financial instruments, including how they can be monetized for your client.

Chandler says advisors can offer valuable expertise when working with clients going through divorce, but that they need to be clear on their role -- which could include serving as an expert to a third-party professional like an attorney, being hired as a mediator, or acting as a client advocate.

"Divorce requires a lot of subject-matter expertise, plus the ability to see the big picture," Chandler says. Advisors can expect to evaluate assets including retirement plans, stock options or restricted stock, and private equity, among others.

  • Get started: Not all financial advisors can easily become an expert in all types of complex securities, so can play to your strengths. If you're an expert with retirement plans, you may want to consider focusing on helping divorcing couples with large plans. If you work extensively with stock options, consider serving corporate executives and their spouses. Assess your knowledge base, and then act accordingly.

A thoughtful, compassionate financial advisor can be essential for women experiencing the loss of a spouse or divorce. Applying the strategies and principles offered from these real-life examples may help you better serve your clients, and ultimately help you expand your business.

Laura Kogen is vice president, Practice Management & Consulting, at Fidelity Institutional Wealth Services. Fidelity Institutional Wealth Services is a division of Fidelity Brokerage Services LLC. Member NYSE, SIPC.

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(1) Comment
Well done! In my new book, COVERING YOUR ASSets, I deal with six major life situations, Single, About to Get Married, Married, Separated, Divorced and Widowed, and address issues associated with those life situations and strategies and techniques that should be considered. I have found that way too many advisors need to be better listeners, but they are not counselors. That is why advisors should learn how to channel a discussion to the pertinent issues of the client's life situation. You can only do this with good preparation and a well thought out plan for the meeting. I can only add that advisors working in this area should attune themselves to the life situation, Separated. It usually precedes divorce, and getting involved then can go a long way to creating or strengthening a lasting relationship with the client.
Posted by Leonard C | Friday, March 28 2014 at 2:42PM ET
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