People often talk about the challenges people face when they suddenly become wealthy. For example, receiving an unexpected cash grab from an inheritance, lottery jackpot, or the like can change someone’s life in unexpected ways.
For those who experience sudden loss of wealth, their lives are disrupted and their plans for the future vanish in an instant.
Perhaps they are victims of investment fraud or business tanks. Or your homeowner’s insurance may not adequately cover severe flood or earthquake damage.
Regardless of the cause, the result is often paralyzing. Desperation can set in as individuals and their families struggle to cope with the erosion of assets.
Financial advisors cannot use magic, but they can provide perspective and emotional support. As much as helping clients develop strategies to recover from a major financial blow, their compassion and willingness to listen is just as important.
“The challenge as a financial planner is to provide both emotional and financial support,” says Jay Zigmont, Certified Financial Planner at Childfree Wealth in Water Valley, Mississippi.
For example, a seemingly healthy mid-career professional may suffer a heart attack, stroke, or other life-altering illness or injury. Depending on your medical and/or disability insurance policy, there may be gaps in coverage and out-of-pocket costs may increase sharply. “Hundreds of thousands of dollars can be used up quickly,” Zigmont said. “Also, if you can’t go back to work, your income will decrease.”
As uncovered medical bills grow, advisors may suggest options for the client to survive. I can do it.
“You can apply for financial assistance or charity care while you’re in the hospital or after you’ve been discharged,” Zigmont said. He may instruct his family on how to work with the facility’s billing office to agree on a payment plan and prevent the hospital from assigning a collector to the account.
Advisors often encourage clients in their 50s to purchase long-term care insurance to protect against the ever-increasing cost of home care assistance and other ongoing costs should they become unable to manage their daily care. increase. For example, someone newly diagnosed with dementia or Parkinson’s disease may face 10 years or more of private health care costs.
Prem G. Hira, founder of Investry in Scarsdale, New York, has advised clients faced with what he calls an “accelerating resource drain.”
In one case, a family set up a trust with once sufficient funds to cover their grandchildren’s education.
“Now they are panicking and feeling defeated,” said Hira. He doubles as a kind of financial therapist. “It’s important not to judge,” he said. “I told them they weren’t alone. Many families have derailed their long-term plans in the last few years.”
He also shares strategic advice. He helped save his grandchildren’s tuition by resetting their financial plans and designating “buckets” in their portfolios as his family replenished their college funds.
“Some people don’t listen in their families, but they should,” Hira said. to strengthen communication between
For some individuals, sudden wealth loss comes with a warning. The impact is still strong. Her Nicole Gopoian Wirick, a certified financial planner at Prosperity Wealth Strategies in Birmingham, Michigan, said: challenge. “
To help her divorced client cope, Wirick reframes the situation in positive terms. She begins by encouraging them to adopt new attitudes and start fresh. “It’s a chance to reset the narrative and turn it into an opportunity to move into a new phase in life,” she said.
To guide clients down this new path, she asks two questions.
1) What are your values?
2) How do you build a financial plan that aligns with your values to live a lifestyle that reflects your values?
The movement tends to lift their spirits despite the loss of wealth.
“Seeing the big picture can seem so impossible and daunting,” she said. “You can build their confidence by taking small steps.”