Financial advisers often double as therapists. As clients share their innermost fears about money, the challenge is to dish out wise advice that sticks. But when clients are shaken to their core, an adviser may struggle to offer words of comfort.
The recent surge in job layoffs is a case in point. In 2022, tech firms cut more than 140,000 jobs. Close to 100,000 more tech workers have been laid off so far in 2023.
While diligent advisers help clients plan for worst-case scenarios, a layoff still stings. Even if their adviser assures them that their rainy-day fund is sufficient to weather the storm, investors may find that the anxiety that accompanies sudden job loss is tough to shake.
News of a layoff puts the adviser-client relationship to the test. If the adviser responds with a mix of compassion, empathy and pragmatism, it can solidify their bond.
“It’s a time for the adviser to shine,” said Tim Melia, a Seattle-based certified financial planner. “It’s when you can really add value and earn your fee by stepping back, listening actively and letting the client express all the emotions” that a layoff triggers.
Well-intentioned advisers can fall into a trap when learning of a client’s job loss, launching into a lecture on why there’s no need to worry in the short term. Urging the client to “stick with the plan” or reminding them that “we’ve built in safeguards” to absorb shocks like a layoff may seem like a good idea. But running through the numbers won’t resonate with a distraught client, at least at first.
“The value may not be in what the adviser has to say, but rather that the adviser is present to listen to what the client has to say,” Melia said. He keeps a box of tissues within reach of the client and lets them steer the conversation. They may need to vent or otherwise talk through their personal concerns before they’re ready to review their financial plan.
“Layoffs can be pretty blindsiding,” said Ryan Kaysen, a certified financial planner in Blue Bell, Pa. “So you have to handle the emotional side first.”
Specifically, that means harnessing the power of silence. Advisers can signal their support by staying quiet as the client grapples with what to say next.
Kaysen follows an 80/20 rule: He tries to limit his talking to 20% of the conversation so that he can listen most of the time. “Don’t assume you know how they feel,” he said. “Let them tell you.”
Reflect their emotions in a caring tone. Saying, “That must be tough to deal with,” as they dissect the events that led to their layoff enables them to elaborate, digress or simply lament their bad luck.
Sharing your experience or rushing to give unsolicited advice can backfire. Avoid phrases such as, “Yeah, I went through something similar when…” or “I’ve found that when these kind of things happen, I’ve been able to bounce back by…”
Instead, attentive advisers listen in a patient, nonjudgmental manner. They keep the focus on the client’s emotions and efforts to cope. “You’re asking the client to be vulnerable,” Kaysen said. “Don’t talk over them. Just listen and be there for them.”
After working through their emotions, clients are ready to talk about money. Do they have enough on hand for now? Do they need to rethink their spending habits?
In many cases, Kaysen will review their household budget. He might suggest ways that they can reduce expenses as they seek to replenish their income.
Stepping back, he helps them put the layoff in perspective. They may fixate on it as a painful blow. But he encourages them to use the time to look at all their career options with fresh eyes.
“They may say, ‘Today is a really bad day. My life is terrible,’” he said. “I’ll say, ‘In terms of your entire life, it’s a small, challenging blip.’”
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