What to do when a client has a personal financial crisis

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3 mins read

Many financial advisers have seen it: a client faces some unexpected problem or financial burden and insists that the careful long-term plan you’ve helped them create now has to be torn up.

When this happens the emotional stakes are high, so advisers need to call upon their people skills as much as their financial acumen.

Psychologist Alison Hill is the Founder and Director of behaviour and motivation strategy company, Pragmatic Thinking.

She's says it's important to guide your client through the crisis and then re-evaluate.

“Keep it an open option that the long-term financial plan may change, but ‘emotional now’ is not necessarily the best time to make that decision,” says Hill.

First aid

Start by assessing the urgency of the situation your client is in, both physically and mentally.

“If it will have an immediate impact on someone’s ability to have food on the table, a roof over their head for the foreseeable future, or to have their family supported then it may require financial advisers to know where they can refer individuals,” Hill says.

Prepare for any future client crises by getting to know what support is available via their family, local community services, and mental health professionals.

Be a good listener

When it comes to supporting others in financial crisis it’s important to create the space and time to listen and express empathy, says Hill.

She recommends advisers consider two different listening strategies.

Hill suggests directing the conversation to something visual to be able to talk through rationally what is often a highly stressful moment.  “Encouraging clients to go for a walk and talk can be useful too – to shift the emotional experience.”

To be able to express empathy for your client, you need to understand what they're going through, so don't be afraid to ask questions. “The key drive behind questions should be curiosity,” Hill says.

“Open-ended questions will encourage others to speak and share their experience.”

You're not alone

Don’t feel like you have to solve everything.  “Be okay to be supportive without having to be the only support that someone connects with,” Hill says. “There are other resources in the community including relationship support, counsellors, family care organisations.”

It’s also really important to look after yourself as you go through an emotionally taxing situation. “Reach out to colleagues and other professionals to debrief and gain support,” Hill advises.

Prevention is better than cure

When it comes to helping a client through a personal crisis that old chestnut rings true. “The ability to predict a change in financial situations is better than being surprised by it,” Hill says. “Therefore having a level of risk in the conversations early in the relationship is important.”

Of course, life's not always nice, neat and predictable so it's important to let your clients know you're there for them – in good times and bad. “Things can happen and shift quickly, therefore talking through financial options as soon as possible is key,” Hill says.

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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Pragmatic Thinking is an external entity that is not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Pragmatic Thinking and its employees does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties