Dealing with clients in personal and financial distress

ASIC’s annual Australian Financial Attitudes and Behaviour Tracker reports that the number of Australians who find dealing with money overwhelming has jumped 20 per cent since 2014 to 36 per cent.

Much of this can be attributed to the pressures of modern living. But if people are also dealing with tricky personal issues, this might add to their financial distress. As a financial adviser, these are difficult areas to navigate with clients. However, according to Wayne Leggett, Principal with Paramount Financial Solutions, the fine line can be walked.

Focus on the financial problem

Leggett suggests focusing on the financial implications resulting from a client’s personal actions, rather than the underlying issues. It’s one thing to pick up on one tell-tale sign that a client might be going through a rough patch – but it’s quite another to be able to do anything about it

Signs to watch out for

“A client’s non-verbal signals may suggest that something’s not quite right,” says Leggett, “and that’s especially evident if a long-standing client is behaving out of character.” 

Indicators of emotional stress leading to financial stress can include any notable lifestyle changes. These might include a cessation of planned holidays, spending that exceeds income, friction between family members, evidence partners aren’t talking, prolonged workplace absenteeism, difficulty paying bills, or a reluctance to be up-front and honest

Honesty is the best policy

In difficult circumstances, Leggett cautions against allowing the line between friend and client to be crossed.

It’s also important to lay all the issues on the table and address them as directly and early as possible. The financial circumstances of a client in personal distress can go downhill very quickly. Leggett’s advice to finance professionals is to gain a good, honest snapshot of a client’s circumstances as a matter of priority, and openly discuss it with them.

“You can ‘lean into’ these sorts of issues by asking if there’s anything compromising your ability to deliver what you’re there to do – namely provide value within the underlying financial advice.”

Recommend a budget review to see where discretionary spending could be tightened, and refer clients in need to counselling.