Helping clients deal with financial stress

Supporting clients in the face of the COVID-19 pandemic is no easy task. But supporting them properly can mean addressing both emotional and financial stress.

The pandemic has disrupted daily life, communities and the financial markets. It also places an extra burden on financial advisers who may need to manage stressed clients adapting to new circumstances.

Financial worries can be a leading source of personal stress, and for many, the pandemic disruption has amplified this. For financial advisers this can mean deploying specific strategies to help stressed clients make well-informed financial decisions.

According to Dr Jodie Lowinger, CEO and Founder of the Sydney Anxiety Clinic, advisers have the best chance of meaningfully engaging these clients if they can first address their stress, by acknowledging the emotional challenges they are experiencing, before moving onto financial decisions.

The way to help stressed or anxious clients is to validate or acknowledge their emotions. When people feel ‘heard’ in this way, engagement and collaboration are more easily achievable.

In order to have the best chance of productively engaging with stressed clients and getting them onboard for sensible decision making, Dr Lowinger advises not downplaying or minimising their negative emotions.

Instead, advisers can help move their clients away from worry, which is typically a focus on future uncertainties. To do this they can focus on active problem solving through guided, open-ended questions around the parts of their challenges that are in their control.

For example, an adviser may want to remind the client that they have already overcome a financially difficult position in the past. Together, they can then brainstorm what strategies they used in the past to make ends meet, that can then be applied in their current situation.

Helping clients identify financial goals and working with them to create a plan to achieve them is significantly more likely to alleviate financial stress.

Proactively supporting clients

One of the best services advisers can offer clients at the moment is to be informed and across the temporary relief measures announced by the Federal Government and regulators to support Australians impacted over this time.

Specifically, clients seeking urgent assistance from their financial advisers are likely to have queries about whether their financial plan will still allow them to live the life they want, whether their retirement is affected and whether they should access their super early. These conversations are likely to start with how the clients financial position may have changed, putting in place strategies to support them, reviewing government financial assistance they may qualify for and more significant steps like the early withdrawal of superannuation.

Dante De Gori, CEO of the Financial Planning Association, says a good first step is for consumers to assess their current financial situation including balances on their savings accounts, debt obligations and identify cost-saving opportunities where appropriate.

“Keeping in mind that the crisis is not over yet, it’s important for all Australians to continue to plan their finances prudently, and tread cautiously before they feel 100% confident of the economic situation, as well as the state of their own personal finances,” he says. “There isn’t a lot you can control right now, but one area you can control is your cash flow.”

Advisers should also be prepared to field questions about what financial support is on offer and whether the client is eligible for the Government’s COVID-19 economic stimulus package measures, such as JobSeeker, the Coronavirus Supplement, the $750 Economic Support Payments (the second of which is due from 15 July), as well as early superannuation withdrawal and mortgage payment deferral options.

Given the importance of cash flow at this critical time, access to superannuation will be an option being considered by many clients. Although the first period for early access to super closed on 1 July, Australians can access up to $10,000 of their superannuation from 1 July until 24 September 2020, in the scheme’s second tranche.

However, the Australian Securities & Investments Commission (ASIC) notes that the temporary relief measures will not be for everybody and advisers must consider how their clients’ personal circumstances may have changed as a result of the COVID-19 pandemic. In the case of the early release of super, this would include its impact on the clients’ insurance cover and the long-term result of the withdrawal on retirement benefits.

For further reading on the Federal Government’s COVID19 economic packages, see the websites of Certified Practising Accountant Australia (CPA), Chartered Accountants Australia and New Zealand (CA ANZ), SMSF Association (SMSFA), Financial Planning Association (FPA), Institute of Public Accountants (IPA) and Association of Financial Advisers (AFA).

For additional support in planning, budgeting and better managing financial matters, advisers can refer their clients to these services: