Six years out from retirement, the executive had all his assets invested in the Fortune 500 company where he worked. He fully expected the stock to double in the next few years.
His wife didn't believe it. Her fear was that the stock would tank and they wouldn't be able to retire. Her own part-time salary at a nonprofit couldn't possibly create the nest egg they needed.
"When this couple came to see us, you could feel the tension," said planner Brian Henderson of the Keystone Financial Alliance in Atlanta. "He was very confident about the risk they were taking, and she was extremely nervous."
Clients who need help managing financial transitions like retirement are becoming more and more common, according to Susan Bradley, founder of the Sudden Money Institute in Palm Beach Gardens, Florida. "There isn't an advisor who doesn't work with clients grappling with transitions—the loss of a spouse, retirement, inheritance, divorce, sale of a business, marriage, a major career change, a large sports or entertainment contract, a legal settlement, a change in health or an elder transition," said Bradley, who is also a CFP. "But we weren't trained to deal with the human side of any of these issues. We were trained to make the numbers work as best we could, and the client had to deal with all the rest."
This missing link in advisor education inspired Bradley to design and develop a powerful program leading to the trademarked designation of Certified Financial Transitionist (CFT). A CFT is usually a CFP, held to the CFP fiduciary standard with extensive training in change management added to their traditional CFP education in financial management. To date, more than 120 legal and financial planning professionals like Henderson have completed the four-part program.
"Fifteen years ago, there was no financial planning model that covered the personal, human experience of managing change," Bradley recalled. "As a CFP, I was comfortable with the technical side of most of these situations. I was a big advocate of financial literacy and participated in many financial literacy initiatives over my 20 years as a planner. But there was still something missing: transition literacy, which is fundamental to managing change."
When Bradley couldn't find information about guiding clients through the personal side of change, she researched and wrote the book she had hoped to read—"Sudden Money: Managing a Financial Windfall." Offering the first financial planning model to deal with major life transitions, it became a founding document for the Sudden Money Institute (SMI), which she opened in mid-2000 as a collaborative think tank of financial planning and legal professionals.
"Together, we started to look into transitions," she said. "We wanted to understand some of the tough or regrettable decisions people made in response to these life events."
When 9/11 happened, it underlined the need, and the tremendous difficulty, for people in trauma to make important financial decisions. SMI's transition management program evolved as a way to help people make good financial and life choices in the face of sudden change, while avoiding really big mistakes.
Resolving a Couple's Conflict
Henderson's approach to working with the Fortune 500 executive and his worried wife combined SMI's transition management tools and processes with his own expertise.
"We believe transformation comes from knowledge and awareness," Henderson explained. "With this couple, we needed to understand what their blind spots were and where they might have some gaps of understanding."
His first step was to learn the clients' preferred communication styles. They turned out to be complete opposites. "The husband was analytical and needed to see all the details," he recounted. "But details made the wife feel overwhelmed. She just needed to trust us and the recommendations we provided."
Thus, Henderson's initial objective was to build trust by sharing his firm's history and process. This information was particularly important to the husband, helping him feel that they had come to the right place.
Then Henderson worked on dispelling myths they had about retirement. No. 1 was their belief that the husband would have to work until he was 65—another six years—in order to qualify for the Social Security and health insurance benefits they thought they would need. By walking them through different financial scenarios, Henderson enabled them to see that they could retire three years earlier than they expected.
In the process, the couple also came to realize that it wasn't necessary to take the risk of keeping all their assets in his employer's stock. "When they understood that they could reach all their goals years earlier than planned," Henderson said, "the husband agreed to sell 75% of his company stock and the wife burst out crying in relief."
Understanding How to Communicate
"We find that when people go through transitions, there's a diluting of some life skills, including the way they communicate," Bradley said. "They're not as clear; they revert to their hard-wired communication preferences. If you worked with them successfully before the stresses hit, now you may find they need to communicate differently."
As Henderson's story illustrates, CFT training puts a high priority on learning what makes a client feel comfortable and productive. For example, Bradley noted, some people want a detailed meeting agenda beforehand. Others dislike homework and simply want to know that you will lead them through the meeting.
Advisors also need to know how clients like to receive information and recommendations. As Bradley pointed out, some may want a one-page overview with bullet points. Others prefer to have all the details.
Another preference is how clients make their best decisions. Bradley suggested, "Do they like to know the financial options? Do they like to talk about lifestyle possibilities? Do they prefer to have a lot of information before they come in so they can make decisions during the meeting, or would they rather take the information home afterward and think about it?"
SMI has created a list of communication and decision-making style preferences, from which clients are asked to choose the two or three that are most pertinent to them. Advisors learn to ask clients what these choices really mean.
For example, Bradley told of interviewing a woman who identified a need for control as her top priority. When questioned, the woman explained that what she really needed was not to feel out of control—a very different thing. By asking what types of situations made her feel out of control, Bradley was finally able to get at what made the woman feel comfortable in meetings, ready to absorb information and able to make choices.
"Without this discovery process, it would have been hard to have a meeting with her," Bradley added. "She appeared dysfunctional and unable to make decisions."
Instead of imposing your own style on a client struggling with change, determining the client's own preferences can lead to profound discoveries. "The Certified Financial Transitionist is the client's thinking partner, not the expert," Bradley said. "The client is the expert."
The 'Decision-Free Zone'
CFTs are trained in sorting through what needs attention, prioritizing issues into "now," "soon" and "later."
