Today, your role as a financial advisor extends well beyond offering investment advice. Your activities can include organizing a family-friendly client event or moderating a meeting involving parents and their “boomerang” offspring. So, when your clients are planning a vacation, they may turn to you for advice on issues such as budgeting, currencies and insurance.
“A lot of advisors are hesitant to ask clients about their personal lives,” says Noel D’Souza, certified financial planner (CFP) with Money Coaches Canada Inc. in Toronto. “But an advisor’s role is helping and guiding clients to live the lives they want. And part of that includes their leisure plans.”
Although most discussions you have with your clients may centre on retirement goals and investments, you also could consider how you can help your clients manage short-term goals and expenses. And, as many of your clients head into retirement, you can expect questions from some clients about how they can pay for a multi-city trip or a lengthy stay in a foreign destination.
Those conversations, D’Souza says, may come up casually during client meetings and provide an opening to strengthen your client relationships.
– Beginning the vacation conversation
Routine discussions about your clients’ plans for the year ahead can present an opportunity for you to weigh in. If, for example, a client wants to go all out and take an extravagant European tour that will cost $20,000, D’Souza says, you could try to gather some details about the vacation, including its duration, the timing and how the client plans to finance it. Even if your client mentions a less costly trip, you can initiate a discussion about how such an expense could relate to that client’s financial goals.
“Some [clients] may have a sense of what they want, but haven’t fully thought about what they’re going to spend and how it’s going to be paid for,” D’Souza says. “Having that kind of conversation is important to understand what the client’s mindset is.”
You may even be called upon to help your clients determine whether they can afford a trip and whether there will be hidden costs. Travel can be infinitely expensive, D’Souza says: “It can be painful for your clients to end up with a ‘debt hangover’ if they haven’t prepared for it in advance.”
If clients are tight on cash and have to dig into their savings to cover the costs, thus derailing other immediate goals, offer to work with those clients to come up with a plan. For example, you could suggest putting their savings in an appropriate investment vehicle, D’Souza suggests, or identify which investments to sell. When clients have to shuffle their investments and make tweaks to their goals to reflect anticipated expenses, you may have to revisit their financial plan.
A desire to travel is, for many clients, a strong motivation to save, according to Patrick Fitzgerald, financial advisor and CFP with Sun Life Financial (Canada) Inc. in Toronto.
“It’s something we always discuss when looking at an overall financial plan,” he says. “We want to make sure clients have [travel] in their budget or cash flow.”
Michael Silicz, an investment advisor in the wealth-management division of National Bank Financial Ltd. in Winnipeg, works with several “snowbird” clients who frequently go away for months at a time. Silicz sometimes offers to arrange to have income earned from these clients’ ETF or bond holdings routed automatically into their bank accounts during their absence. That way, clients don’t have to sell off their investments to generate cash.
And this strategy saves them the trouble of figuring out how to free up funds.
– Currency exchange
Silicz notes that clients should be reminded that most credit cards, when used to make a purchase in a foreign currency, charge a small spread for the conversion.
Clients who spend a significant amount of time abroad, particularly in the U.S., should consider getting a U.S.-dollar (US$) credit card and opening a US$ bank account to minimize those fees.
Of all the expenses that your clients expect to rack up while on vacation – from flights and hotels to souvenirs and museum passes – the need for travel insurance often is overlooked.
And as straightforward as some insurance plans may seem, your clients should be advised to investigate the terms of their coverage and check to see whether an upgrade is needed, D’Souza says.
Eric Fournier, travel insurance advisor at Desjardins Financial Security Life Assurance Co. in Quebec City, says clients should consult their insurance provider about their plan’s limits.
“Call first before incurring the expense for [replacing lost] luggage or for medical costs,” D’Souza says.
There may be restrictions on how long a client must wait before buying new clothes, for example. Or there may be exemptions for pre-existing medical conditions.
If your clients plan to be away for an extended period, D’Souza says, you could advise them to look into their home insurance as well. He suggests your clients ask someone to check on their home regularly. If the home is left unattended for a certain length of time, a claim for damage incurred as a result of a gas leak or a burst water pipe could be denied or limited.
Although Fitzgerald doesn’t provide travel insurance, he frequently refers his clients to other advisors who do, advisors with whom he has developed relationships.
“Our view is that we want to make sure we’re the financial quarterback,” Fitzgerald says. “We’ll point clients toward a trusted referral, so they can get the appropriate advice and service they need.”
Warn your clients of cybersecurity risks while abroad, and avoid making financial transactions with them over the Internet.
Exchanging emails with clients regarding financial matters while they are travelling could compromise the security of your clients’ finances. A client might log into an unsecured Wi-Fi network or use a public computer, thus unwittingly leaving information about their accounts vulnerable to hackers.
Silicz once received a suspicious email from a client who was out of town. The message was in the same font and carried the signature usually associated with the client’s account, but it was riddled with spelling mistakes and other typographical errors, which raised flags for Silicz. More important, the message contained an odd request: to transfer a certain amount of money to an unknown account in another province.
Instead of responding, Silicz notified his firm’s compliance department and tried to reach his client by telephone.
“Given the nature of the request and the fact that the client wasn’t responding to our phone calls, we knew something was up,” Silicz says.
Before proceeding with any request to move money, Silicz says, ensure that your clients have signed off on the transaction or discussed those plans in person. Although Silicz’s team was able to trace the source of the breach, he suspects that the client had used a weak email password.
To avoid such breaches, Silicz recommends clients use a password-manager application (such as Zoho or Dashlane), which aids users in keeping track of all their passwords, varying the complexity of each one without the user having to worry about remembering them.
For an extra layer of security, activating a two-factor authentication feature for emails reduces exposure to hacks. Any time the user logs into an unfamiliar device, a security code is sent to a device associated with that account, such as a smartphone, and that code then is required to unlock the account.
– Estate planning
Preparing for a major trip can trigger a conversation with your client about his or her estate.
Although few people die while on vacation, D’Souza says, travel may inspire thoughts of mortality among some clients: “[An impending vacation] is a useful opportunity for an advisor to make sure that the client’s estate plan is properly set up in case he or she becomes incapacitated or passes away.”
If your client already has an estate plan in place, D’Souza says, ask if it’s up to date and suggest that he or she touch base with his or her appointed executor or next of kin to inform that person where all the documents related to the client’s estate are stored.
Executors need to be aware of their responsibilities, Fitzgerald adds. He tries to raise estate issues in the early stages of creating a financial plan, in an effort to instil their importance among his clients.
Scrambling to sort out these affairs just before your client departs for vacation hardly is ideal. Having a well-crafted, comprehensive financial plan – and an estate plan – in place can help prepare your clients for unforeseen circumstances, including those encountered while enjoying a well-deserved vacation.
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