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Financial Planning

Are You Hiding Symptoms of Poor Financial Health?

Some things aren't easy to talk about with your financial adviser, like a half-baked restaurant venture or that exorbitant vacation home. But if you hold back, you’re just shooting yourself in the financial foot.

A visit to a doctor’s office is about as personal — and for many, uncomfortable — as it gets. If you’ve come to the office with symptoms and had tests done, the physician might even have an unpleasant reveal for you about your health and may want to learn more about your behaviors. It’s time to fess up.

Or maybe you won’t.

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It’s not uncommon for patients to hide personal details about their health or downplay their symptoms to a doctor, perhaps because they’re embarrassed or because they want to influence the diagnosis. And by the same token, people frequently do the same thing with their financial advisers.

All too often, clients hide information about their money, even from a trusted adviser hired to manage their finances. It’s possible they secretly made a bad investment and don’t want the truth to come out, or they feel that certain activities, preferences or purchases may negatively affect their estate. More often than not, people just don’t want to look like they’re in bad financial health.

But what they may not realize is, just like a doctor needs a full picture of a patient’s health before they can provide a proper diagnosis, advisers need the whole story about their clients’ financial life, too. Only when that open and honest communication occurs can the adviser make the proper planning recommendations.

Why People Hide the Truth

Hiring a financial adviser is no small decision. Not only are clients giving someone — normally a stranger, at first — access to their money and allowing them to make decisions that will have a significant impact on the remaining years of their life, they are sharing intimate details that only one or two others may know.

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Still, it’s hard for many to even discuss their finances, let alone be completely honest. A 2014 Wells Fargo survey found that it’s more difficult for people to talk about their personal finances (44%) than death or the quintessential dinner table no-no’s: politics and religion.

It’s no wonder then, that a similar portion of the populace struggles with financial honesty, particularly with their spouses. In a 2018 survey, 41% of respondents admitted to committing “financial infidelity,” or committing a financial deception, against their loved one. If this many people are hiding money matters from their spouses, it’s an easy leap for those same people to lie to their adviser.

So why lie? Money can be extremely personal, and many people derive their self-worth from just how valuable their accounts and other assets are. If they made a bad investment, they may think it reflects poorly on them or perhaps be embarrassed by making a decision they know their adviser would have advised against. Or if a spouse is in the meeting and is unaware of certain debts the client has, it may not come up because it will make them look like a bad provider.

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Sometimes, it’s simply a matter of trust. Early in a relationship with an adviser, some clients may not be sure about the person with whom they’re entrusting their accounts. Until their adviser has demonstrated their integrity and earned their trust, they may not be totally forthright.

What People Hide

As advisers, we’ve seen plenty of clients use misdirection, tell half-truths or hide their full financial picture.

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Sometimes, it might be a seemingly harmless situation, such as a client having portfolios with more than one adviser. This isn’t uncommon, but an adviser at minimum should have access to view the other accounts, just to see how they are structured. That information helps ensure a client isn’t too heavy in one asset class or too light in another. If the client won’t give us access, that lack of visibility will impact the degree to which we can support their goals. Without a complete understanding of the client’s financial life, we will not be able to integrate all the components into a carefully constructed, comprehensive strategy.

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Clients may also lie about their spending history and habits. They may have bought an irresistible vacation home that is beyond their means and, feeling a little regretful, don’t want to share that information with their adviser. Taking this to an extreme, they may conceal negative behaviors, such as substance abuse or gambling addictions. It’s not our job to be a parent, therapist or moral adviser, but ill-advised purchases and behaviors can be harmful to someone’s financial health (as well as personal health) and can blow up a budget in the present, and their legacy down the road.

This can extend to hobbies and lifestyle expenses, too. If, for example, a client had a passion for collecting luxury cars, aviation or racing horses, full disclosure with their financial adviser would be essential. And candor would be necessary about not only the purchase price of the acquisitions, but the ongoing maintenance fees as well. For an equestrian enthusiast, there are many ongoing costs that a client may not want to disclose, such as insurance, farrier fees, housing and transportation, perhaps because these costs would make their passion look more like a hobby than a successful business. But from an adviser’s perspective, being apprised of the client’s true spending is essential, as they will impact not only cash flow projections and investment management, but risk management, tax planning, philanthropic planning and estate planning as well. Without a complete understanding of a client’s spending and holdings, keeping their planning goals on track would be like doing surgery in the dark.

What Honesty Provides

With the entire picture of a client’s finances, warts and all, a veteran adviser will be able to make the most informed decisions and to help maintain their client’s accounts and goals now and in the future.

We’re all human — mistakes happen. No one wants to make a bad investment, but many times, it’s out of anyone’s control. There’s nothing to be embarrassed about. And if someone’s spending, investment behavior or other decisions are hurting their long-term goals, a fiduciary adviser should be able to identify the issue and readjust their recommendations and strategy to keep the client on target.

When it comes to physical health, the more information a physician has about a patient’s symptoms, the easier it is to treat them. Even with serious maladies, if they’re recognized early enough, there may be a way out.

The same goes for your relationship with your adviser. Open and truthful communication makes the route toward good financial health simpler and more direct, while obfuscation and lies could make a bad situation even worse.

Honesty, as the saying goes, is the best policy.

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About the Author

Matthew Helfrich, CFP

Partner and President, Waldron Private Wealth

Matt Helfrich is President of Waldron Private Wealth, a boutique wealth management firm located just outside Pittsburgh, Pa. He leads Waldron's strategic vision, brand and value proposition and overall culture of the firm. Since 2002, Helfrich has served in a number of roles including: Chief Investment Strategist and Chief Investment Officer, where he was instrumental in creating and refining Waldron's investment discipline.

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