Through the end of November, oureconomy has shed a staggering 1.9 million jobs in 2008 alone. As a result, many financial planners are having to help clients cope with situations much more dire than their worst-case scenarios. Those who have lost positions in the financial services industry—like the 52,000 laid-off employees at Citigroup whose jobs will end in the coming months—are likely to endure prolonged job searches that will require much more than the typical three to six months' worth of emergency cash they may, ideally, have on hand.

"We don't know how long it's going to take some of these people to find jobs," says financial planner Chanie Schwartz, founder of A Vested Interest Inc. in New York City. "There are people who are going to get washed out of the financial sector and may never find jobs there again. They need to come to grips with reality and get into a new career path."

With more pink slips on the horizon, financial planners need to prepare. Clients who are flailing and desperately in need of guidance are not necessarily ready to seek it out, especially when they are trying to slash expenses. "If the planner doesn't get a chance to walk them through [a job loss], logically you'll have some clients who will say, 'I'm going to cut my planner too,'" says Lisa Kirchenbauer, president of Kirchenbauer Financial Management in Arlington, Va. She currently has several clients who expect to lose their jobs soon. "The No. 1 thing is to keep the lines of communication open, especially with those clients in at-risk industries. Get in touch and ask, 'How are you doing? Do we need to sit down and make a plan B?' Some people will really welcome that."

Financial planners will find themselves acting more as counselors than number crunchers as our economy goes through profound shifts and clients are forced to do some soul-searching. The loss of a job is a terrible blow to the ego. Clients feel embarrassed, uncomfortable and scared. Planners need to calm panicked clients and provide support by focusing attention on what can be controlled: cutting expenditures, figuring out emergency funds, evaluating how to replace lost benefits and making a game plan for the job search. The challenge to financial planners is to find the opportunity in the crisis, stretching their own skills and finding ways to add value while cementing client relationships by being there in a time of crisis.

Finding Emergency Cash

In today's environment, some planners are advising those who still have good jobs to try to stash at least a year's worth of cash in a money market fund for emergencies. Many will not have enough. If a client has not yet separated from his or her employer, check whether he or she can tap retirement funds. Many accounts have lost considerable value this year, but if borrowing against money in a 401(k) account is necessary, planners can help clients figure out how to pay it back.

"This can be a dangerous move when coupled with the market decline, but they may be able to get their emergency fund, and the time to do it is when they're still technically with the company," says Shashin Shah, principal at SGS Wealth Management in Dallas, who has assisted executives with buyout packages and layoffs.

Typically, the account holder is allowed to borrow about half of the value of the 401(k), up to a maximum of $50,000. The planner should figure how much will be needed to service the loan each month. Say a client has $100,000 in a 401(k) account and has monthly expenses of $4,000. He believes it may take up to nine months to find another job. "He could borrow $50,000 and I would recommend he put away enough money to service the loan for nine months. If it costs $1,000 to service the loan, we plan to set aside $9,000 and he can use the rest for expenses," Shah says. Fairly shortly after separation, however, most plans will require the loan to be repaid, or it will become a taxable distribution. This may be a risk worth taking if a client has few resources.

Clients also may need to rejigger their thinking about debt. Schwartz notes that when people are laid off with big severance packages, "they tend to be aggressive about wanting to pay off debt—such as credit card or 401(k) debt—before it becomes a taxable distribution." But in today's environment, she emphasizes, "they should conserve cash and see how long it will take to get a job."