Money is complicated. Talking honestly about money and your aspirations with someone else can be fraught with anxiety. This is one of the biggest reasons why many people find working with a financial advisor to be so challenging. Some people completely avoid seeking help, even when they need it.
Working as a financial advisor allowed me a glimpse into the lives of thousands of people over the course of my career. What I found is that money cannot erase insecurity, embarrassment or anxiety. More often than not, it amplifies those feelings.
Honesty will lead to the best financial advice
At the start of any financial planning relationship, in what is commonly referred to as the discovery meeting, an advisor will start to ask questions about nearly everything, including income, expenses, assets, family, goals, fears, mistakes and lessons learned. Most clients deliver the necessary details but also hold things back. Sometimes it takes multiple meetings to unearth painful or challenging issues that are impacting their financial needs and goals.
Most clients wish they had brought those issues up earlier. Why do they hesitate? Often it is a lack of trust, fear of judgment or embarrassment. Bringing up some of those hard-to-discuss problems earlier can make your relationship with an advisor stronger because the most painful issues are usually the ones that need the most attention.
The following are the four biggest challenges I wish clients would have admitted to me sooner.
1. ‘I don’t trust you, but I need your help.’
Trusting a financial advisor, usually a complete stranger, is hard. Baring your financial soul to someone can feel terrifying. Advisors know this, and we understand. It is OK to be standoffish and uneasy, especially when personal finance might not be a topic that you like to discuss, have much interest in or know much about. But it is important to be open and honest, and that can include sharing the nature of your hesitancy. Trust should be earned, and when you work with a new advisor, they would rather know where they stand so they can work with you in a way that addresses your concerns appropriately.
There are numerous reasons why you might not want to trust a financial advisor. A few of the most common are:
- Concerns over costs or conflicts of interest
- A bad experience with an advisor in the past
- Past money trauma
- Embarrassment over the conditions of your financial situation
While the first two usually just take time and collaboration to solve, the last two are actually the toughest to crack because they can sometimes manifest through lies about your finances. Your advisor is going to take you at your word about what you spend or what your goals are, but they will find it hard to truly help you if they don’t really know what is going on.
Frostys are cool, but not telling your financial advisor about them isn’t
More than a few clients fudged the truth about some spending here and there, but the one that stands out the most was a widower who emailed me late at night after our first meeting to begrudgingly admit that he had lied to me. In his lengthy email, he admitted that he was embarrassed about the hundreds of dollars he spent at Wendy’s every month. When we spoke later that week, he explained that he panicked in my office and didn’t know why he lied.
Some financial choices can feel too personal to share, or just uncomfortable to admit. Rest assured, everyone has their own version of discretionary spending that they’d prefer not to discuss. In those instances, just note that the spending exists, even if you don’t want to elaborate on it. Your advisor will likely be less concerned with what you spend it on than a mysterious hole in your cash flow.
2. ‘I don’t trust my children with money.’
Planning for how to leave an inheritance is a requirement for most clients. After addressing more pressing financial planning needs, such as retirement or college planning, estate planning is one of the most challenging priorities.
Sometimes my clients had already spoken to an attorney, but most times they started their estate planning journey with me. An important element of successful estate planning is for clients to move past the typical “I’ll leave whatever’s left” sentiment and accurately outline their goals. Good estate planning requires specificity, intention and clarity. However, people afraid to admit that they don’t trust their children with money rarely want to spell it out, derailing an otherwise solid financial plan.
Any estate plan, even an unflattering one that demonstrates disappointment in your heirs, is better than having no estate plan.
When there is no plan, your heirs are left on their own to figure out how to split assets and navigate probate in the courts.
The first sign of a lack of trust is a lack of open communication. If you can’t or won’t discuss your finances, goals or intentions with your spouse, children or heirs, then you may not trust them. Even if you can trust your advisor, admitting you don’t trust your family can be hard.
Regardless of what fuels the distrust, sharing your concerns with your advisor can allow you to create a cohesive strategy to protect your assets from your heirs — and your heirs from themselves.
3. ‘My partner and I don’t see eye to eye about money.’
Questions about cash flow management or investment risk tolerance rarely come up in early dating conversations. Sometimes they never come up at all, and that can create stress as partners begin to share financial information and resources. Different outlooks on what constitutes essential expenses versus splurges can slowly eat away at relationship dynamics.
Although most couples typically select one individual to be more involved in managing their finances, the best cure for mismatched money attitudes is to both get involved to avoid being one of the 2 in 5 Americans that keeps a financial secret from their partner. Initially, it is critical to lay the ground rules for important financial decisions and boundaries to avoid mistakes or misunderstandings. If money discussions are not comfortable for your family, then it might be challenging but all the more necessary.
Here are some places to start (but don’t end here!). With each topic, both of you should begin by writing down your own answers before sharing and discussing that information with your partner.
Questions to ask each other
- What is the minimum amount of money on a prospective purchase that would automatically trigger a required discussion? Why?
- Write down your top three short- and long-term financial priorities. Be specific! Now swap lists and discuss.
- What overlaps?
- What doesn’t?
- Why are these your respective goals?
- Discuss some of your beliefs about money.
- What is one lesson you learned from your parents about money that you agree with?
- What is one lesson you don’t agree with?
- What is the biggest lesson you would want to pass on to your children or the next generation about money?
A third party can help facilitate these conversations. A financial advisor or other professional can work with each person individually and jointly to work through both the finances themselves and the guidelines that help shape a cohesive household strategy.
4. ‘I inherited a sum of money and have no financial plan.’
This only came up once in my career, but it remains a situation that haunts me over a decade later despite this person never actually being a client of mine.
A barber in his early 20s inherited a traditional IRA from his father worth roughly $500,000. At the time of the inheritance, he declined to set up any meetings to discuss how to invest or plan for the money.
Over the next two years, he slowly drained the account and never once withheld taxes.
Each time he would come into our office or call to schedule a withdrawal, someone would implore him to talk about how to manage this money and make it last. He likely interacted with nearly everyone who worked in our office at least once. Each time he would deflect. Sometimes he would talk long enough to chat about his new motorcycle, or the playoff tickets he was buying with his buddies. However, he never had time to talk about planning.
In full transparency, the man never shared why he was doing what he was doing or what his life circumstances were. But one day he ran out of money and never came back.
Bottom line
If you’re working with an advisor or want to, be honest. I’m not saying it’s easy, but it can make the process better. As a financial advisor, I heard and saw many things that were eyebrow-raising, but my job was to help clients navigate those issues. What the issues were rarely mattered as much as the clients’ desire to finally address them.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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