The markets of the past year have hit most clients hard - even carefully constructed portfolios have seen more damage than anyone would have imagined possible.In most cases, clients have shared the impact of the market downturn with their spouse, in general terms if not in specifics. In some instances, however, they have not been able to bring themselves to do so. Meanwhile, their families may be doing one of two things - either worrying or spending at the level they did in the past, making financial commitments that no longer make sense.

And that's where a good financial advisor can help.

In early November, New York Times personal finance columnist Ron Lieber wrote a column outlining an approach to open two way lines of communication between children worried about their parents' financial situation and parents worried about their kids. In a draft letter from a hypothetical child, one suggestion made was that he or she tag along the next time the parents met with their financial advisor.

Clients who are keeping bad news about their investments to themselves are adding to their stress level. Most advisors have a certain number of clients with whom they have particularly close relationships, sometimes these relationships have crossed the boundary from business to personal friendships.

If you have one of those especially close clients who you suspect may not have been open with his family about what's happened to his portfolio, consider raising this the next time you talk, using a three step process. (For the purposes of this draft dialogue, I have assumed your client is male.)

1 Recognizing this is an extremely sensitive subject, you could start with something like: "Recently, I spoke to a client who had not talked to his wife about the impact of the downturn on their savings and whose kids were planning a ski trip next spring that is not really affordable. If this isn't too personal a question, have you had a chance to talk to your wife about what's happened to your portfolio?"

2 If your client says he hasn't or has done so in only the most general way and if he seems receptive, you could go on to say: "I know that this is an extremely difficult conversation to have. If you like, I would be happy to sit down with you and your wife to discuss what's happened to your investments, the impact on your retirement plans and how your portfolio is positioned going forward. If it makes it easier, you could say that it was my suggestion." Of course, this assumes you've already had this discussion with your client - if not, you may want to talk to him about this one-on-one first.

3 If your client wants to proceed, suggest that you schedule a meeting with him and his wife as soon as possible. Even if you can't get together until early January, the fact that you have a meeting booked may relieve some of the stress on your client and his wife (who may well have been worried about this herself but was unsure how to raise this subject.) In some households, the stock market will be a particulary sensitive topic over the Christmas holidays, as families spend more time together - and the fact that you've had a discussion about their finances may ease some of the tension around this.

This conversation will not be of interest to every client - and where the conversation takes place, it will not always be an easy one. On the other hand, the news may in fact be better than your client's spouse fears - and even if it is bad news, remember that bad news almost never gets easier to discuss with the passage of time.

The bottom line: As difficult a conversation as it might be, for some good clients you can add value by facilitating a family discussion on the state of their finances.
For those who are interested, below is a link to the New York Times column on a parental conversation about finances. A word of caution: Suggesting that children talk to parents about their financial situation or that parents raise this topic with adult children risks being intrusive, so this particular approach will not be for everyone and should be used selectively.


BUSINESS / YOUR MONEY | November 8, 2008
Your Money: Is It Time to Have a Money Talk, Child to Parent?
By RON LIEBER
Grown children often don't know how the devastation in the markets has affected their parents, and vice versa.