The challenges that people face when they acquire sudden wealth are often talked about. For example, receiving cash from an inheritance or a lottery jackpot can unexpectedly derail someone’s life.
People who experience a sudden loss of property, their lives are also disrupted. their future plans disappear at once.
Maybe they are the victim of an investment scam or their business tanks. Maybe the spouse is hiding gambling losses or other bad debts. Or homeowners insurance does not adequately cover severe flood or earthquake damage.
Regardless of the cause, the effect is often paralysis. As individuals and their families struggle to cope with the erosion of their assets, desperation can set in.
Financial advisors can’t work magic, but they can provide perspective and emotional support. As much as they help clients strategize to recover from a huge financial blow, their empathy and willingness to listen is just as important.
“As a financial planner, it’s about providing support both emotionally and financially,” says Jay Zygmont, Water Valley-based certified financial planner at Miss Childfree Wealth.
For example, a seemingly healthy, mid-career professional suffers a heart attack, stroke, or other life-altering illness or injury. Depending on the terms of the medical and/or disability insurance policy, there may be gaps in coverage that create large costs. “You can go through hundreds of thousands of dollars pretty quickly,” Zygmont said. “And there’s a loss of income if you can’t go back to work.”
As undisclosed medical expenses mount, advisors can offer options to help clients stay afloat. For example, they may recommend that the client engage a medical bill negotiation service that specializes in reducing outstanding debt.
“You can apply for financial assistance or charity care while you’re in the hospital or when you get out,” Zygmont said. He or she can teach the family how to work with the facility’s billing office to agree to a payment plan so that the hospital does not assign a collection agency to the account.
Counselors often urge clients in their 50s to purchase long-term care insurance to protect against the ever-increasing costs of home health aides and other ongoing expenses if they can no longer manage their day-to-day care. Someone newly diagnosed with dementia or Parkinson’s, for example, could face a decade or more of personal care payments.
Prem G. Hira, founder of Investry in Scarsdale, NY, advised clients who faced what he calls “accelerated resource drain.”
In one case, a family set up a trust with once large sums of money to provide for their grandchildren’s education. But unanticipated medical and long-term care costs have led to a significant drain on trust.
“Now they are panicking and feeling defeated,” Hira said. He doubled as a financial therapist of sorts. “It’s important not to judge,” she said. “I let them know that they are not alone, that many families have had their long-term plans disrupted over the past few years.”
He also shares strategic advice. She helped rebuild their financial plan and designate portfolio “buckets” to save for their grandchildren’s tuition as the family builds their college fund.
“Some people in the family are not heard and need to be heard,” Hira said. Thus, part of his role is to respect everyone’s ideas and opinions with dignity, and to establish stronger communication between family members.
For some individuals, the sudden loss of wealth comes with a warning. However, the effect is strong. “When a client goes through a divorce and a judgment is settled, their net worth can go down in a day,” says Nicole Gopoian Wyrick, a certified financial planner with Prosperity Wealth Strategies in Birmingham, AL. “It can be emotional. challenge”:
Virik reframes the situation in a positive way to help divorced clients. He begins by urging them to adopt a new attitude and begin again. “It’s an opportunity to reclaim history and turn it into an opportunity to move into a new phase of life,” he said.
He asks two questions to guide the client on this new path.
1) What are your values?
2) How do we build a financial plan that aligns with your values so you can live a lifestyle that reflects your values?
This exercise tends to lift their spirits despite the loss of wealth. She creates a written plan with steps they can take to achieve their goals.
“Looking at the big picture can seem so impossible and scary,” she said. “Achieving small steps can build their confidence.”
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