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When someone engages an “advice-only” financial planner, the relationship often lasts for the client’s life. I have experienced this with numbers of clients over my 40-year career.
One of the main concerns many of my elderly clients express to me is a need to be sure my firm and I will be there for them when they can no longer “be there” for themselves. I have had clients say, “We want you to promise that you aren’t going anywhere.”
I have made that promise many times. For most clients, I have been able to keep it. I have helped them establish education funds for their children, devise and carry out plans to accumulate wealth, and make the transition to retirement on a sustainable income that allowed them to afford the trips of their dreams in early retirement and cover long-term-health care to make their senior years comfortable. I have said my last goodbyes to them when they entered hospice care and have been there to help their executors carry out their final wishes.
However, in a few cases, I’ve been unable to keep my promise that I would always be there for clients. What neither of us anticipated was that one of the safeguards to protect them if they became unable to make decisions for themselves—drafting a power of attorney and naming an adult child to make financial decisions—would dismantle the plan it was meant to protect.
The biggest risk to a planner/client relationship lasting through the client’s lifetime can be the adult children the client has appointed to hold their power of attorney. When parents’ ability to manage their own affairs falters—especially if the cause is a sudden health crisis—these children often step into their duties without knowing or understanding their parents’ financial plan, financial history, or investment strategy. They may not have had much conversation with the parents about their finances and their wishes.
While trust within the family may have been built over decades, the children may never have met the financial planner. They come into a relationship that starts from square one, just as it would with a new client. The learning curve is steep, and often the time it takes to negotiate that learning curve becomes disruptive and harmful to immediate decisions that need to be made on the parents’ behalf.
Sometimes the new decision makers are operating with just enough knowledge to be dangerous. With little or no understanding of the benefits and costs of financial planning, their focus may be solely on the investments and the planning fee expressed in dollar terms.
I have found that in these cases the atmosphere can turn adversarial very quickly. The kids, wanting to take care of mom or dad against a potential charlatan, demand that the planner defend what they are doing for such a high fee. The advisor’s challenge is to educate them quickly while attempting to defuse the suspicion and anger.
More rarely, the kids’ intentions are less pure, being more focused on a potential inheritance than on their parents’ needs and wellbeing. With one family, I even heard one child whisper to another, “We need to get control of the money so we can be sure there will be something left for us.”
What can you do to help your financial planner and your adult children work together to maintain your financial plan and carry out your intentions? Next week, I’ll discuss some steps you can take. Your financial wellbeing in your later years includes being able to trust that both the advisor and the family members you rely on to have your back are standing side by side.
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