Jessica Ness has a client with a medical condition that likely will force her to retire early. The client thought she had disability coverage through her employer. However Ness, a senior financial planner with CJM Wealth Advisors in Fairfax, Va., reviewed the policy and concluded her client's understanding of the coverage available probably was incorrect.

Like Ness, most financial planners occasionally have to deliver difficult news to their clients. The way in which the information is communicated can determine how the clients consider and accept the changes ahead.

At the start, it's critical to account for the context in which the client will be receiving the news. It may be coming on top of personal tragedies, such as the untimely death of a loved one or an unexpected divorce. "Recognize that receiving this information is really painful and scary," says Gayle Colman, co-founder of Colman Knight Advisory Group in Carlisle, Mass. Baldly stating, say, 'You're going to have to cut spending by X percent,' can feel "like a dagger," she adds.

Some clients' initial reaction will be anger — and some may take it out on their planners. "You're the messenger, so you may get shot," says Neal Van Zutphen, president and owner of Intrinsic Wealth Counsel in Tempe, Ariz. Simply listening and allowing a reasonable amount of venting may help clients move past their emotions and identify next steps.  

That's key, as clients who rush to make decisions often are more likely to make poor ones. "They're not ready to come to a solution," Van Zutphen says. They haven't worked through their emotions and reached a point at which they can rationally assess the alternatives.


Of course, planners need to balance understanding with directness. Clients want to know how the situation they're facing will impact them in real dollars, says Susan Mitcheltree, CFP and vice president with Berman McAleer in Timonium, Md. "The last thing they want is industry jargon." Instead, they want to know if they'll need to stop funding their grandchildren's education or continue working.

Gretchen Stangier, with Stangier Wealth Management in Portland, Ore., uses charts and numbers to show the long-term impact an action likely will have.

In one case, a client wanted to quit his job, even though he and his wife had agreed that he would remain in it for a set number of years after an extended period of unemployment; the wife had been working. Stangier's calculations showed that if his client quit, his wife likely would run out of money after he passed away, assuming normal life expectancies. The visual tools "help the dots connect better," than abstract financial concepts, she says.

During the recent recession, Rick Martin, a senior financial planner with Szarka Financial in North Olmstead, Ohio, had a number of clients who'd lost their jobs. A few expected to find similar positions, at comparable salaries, and in the area in which they were living. "I'd have pretty frank conversations," about how challenging it would be to find what they were looking for, he says. Then he worked with them to identify ways they could apply their skills to other opportunities.


Addressing the root cause of a problem may require some digging.

For instance, Colman has worked with couples in which one spouse was a spendthrift. It would be easy to assume that individual was responsible for the family's financial troubles. However, through her conversations, she often finds both partners had earlier agreed, whether verbally or not, on the spending. The non-spending spouse may have enjoyed knowing he or she was bringing home a salary that allowed the purchases. Or, the spending may have been tacit compensation for the other partner's infidelity. Rather than assigning blame, the focus needs to be on identifying actions that will help the clients move forward, Colman adds.

When delivering news clients likely will find hard to accept, the speed at which it's delivered can be key to how well it's received. "Dole it out at a pace the audience can deal with," Martin says. When clients exhibit physical reactions that suggest they're having trouble accepting the information, such as quivering lips or blank stares, it may be best to stop, let them digest what they've heard, and schedule a follow-up session to discuss how to proceed.   

When Ness talked with her client about her disability coverage, she started by summarizing the research she'd done and letting the client know that if her assumptions were incorrect, her conclusion also would be off. Then she outlined several options. "You have to deliver the bad news in steps," she says.


Also important when discussing unwelcome news is the medium. "The harsher the news, the more you want to do it in person versus on the phone," Martin says. Delivering it personally shows compassion and allows a more accurate gauge of a client's reaction.

Consider who is in the room when the news is delivered, Martin adds. He provides an example: a wife wants to retire, but her husband has asked her to work five more years. Martin's research shows the couple really needs the income the wife would bring in over that time. Bringing this up with both spouses present, would "throw gas on the husband's fire," he says. While both need to see the information and jointly reach a decision, he would try to give the wife a heads-up before meeting with them together.

Similarly, if it's become clear a parent's support of adult children will jeopardize his or her retirement, it's usually best to deliver the information just to the parent, Martin says. He or she can absorb it and decide how to let the children know.

Some parents do include their planners in the discussions with their children. "They can use me as a scapegoat," Ness says.  


Once the unwelcome information is delivered and digested, most clients need to hear options. Not only does this help them begin making decisions, it offers them a sense of control. "Once clients start making choices and being active, they usually see an improvement in the situation," Stangier says.  

For example, after Ness spoke with the woman about her concerns regarding her disability insurance, she outlined several action steps. One was a joint phone call with the woman's employer to double-check her coverage. Ness also offered to check the policies available in the private market, without divulging the client's name. Finally, because the client had been diligent savers, she could choose to self-insure. "It was better to know the options versus to find out later," Ness adds.

Almost by definition, bad news is difficult to accept. Even the most sensitively delivered news won't always enjoy a warm welcome. However, making the effort to convey the information with understanding and empathy can help clients take the actions needed to ensure their future financial health. "When we come at it with care and respect, it makes facing the news a lot easier," Colman says. "Better solutions and next steps come from that."

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