Are Your Clients Financially Enabling Their Children?

“Pleeeeeze?” Your nine-year-old daughter has spent her allowance but is begging you to buy her a toy she “just has to have.”

“I really will pay you back this time. I promise.” Your 30-something son, despite a history of non-payment that would make a banker flinch, is asking for another loan to get him out of another financial hole.

If you can’t say no to requests like these, you might be financially enabling your children. It is one of the most common harmful money behaviors I see.

Most parents want the best for their children. But when does extending a helping hand to a child become emotionally or financially disabling? Sometimes parents’ heartfelt desire to help paves the way to children developing an attitude of entitlement and a disabling financial dependency on others.

Financial enabling is the inability to know when to say no when people continually ask for money. It harms both the recipient and the giver. Often, enablers can’t say no even when they know they can’t afford to keep giving money. Research suggests that about 60 percent of parents provide financial support to children who are out of school.

Why Do People Enable?

Why do parents—including your clients—enable? Often out of love and good intentions that are loaded with unconscious baggage. The enabling may be a quest to meet parents’ emotional needs. It is often driven by feelings of guilt and shame. This can come from just about anything, but divorce, hard financial times and abuse are some of the leading reasons. Other reasons are wanting to save the child from experiencing a financial struggle or a money script that giving money equals love.

Some signs of parental enabling are:

  1. Sacrificing or jeopardizing your financial well-being for children.
  2. Having trouble saying “no” to children’s requests for money.
  3. Repeatedly being taken advantage of financially by your kids.
  4. Lending money without a clear agreement for repayment.
  5. Feeling resentment or anger after giving money.

It is no wonder that financial enabling usually ends up damaging the relationship, which is usually the opposite of the enabler’s intent. Research finds enabling often leads to depression, a sense of being out of control and poor physical health for both parties.

Financial enabling often ends up damaging the enabler’s financial health by eroding net worth, increasing credit card debt, diminishing financial independence and even bankruptcy.

Financial enabling also damages the recipients. The parents’ good intentions often backfire and can result in adult children failing to develop their own financial skills and experiencing emotional side effects. In severe cases, when adult children have become dependent on money from parents, they can experience fear and anxiety over being cut off, anger and resentment and lower levels of motivation and passion to succeed and become financially self-sufficient.

Healthy Giving

Not all parental giving is enabling. Some signs of healthy giving are:

  1. It is clear to both parent and child that the money is a one-time gift with no expectation of repayment.
  2. The gift will not harm the giver’s financial well-being.
  3. The use of the funds is transparent.
  4. There is no history of chronic requests for money.
  5. The money promotes children’s financial health rather than making it easier for them to continue harmful financial behavior.

If you realize that you are financially enabling your children, what can you do? As with other destructive behaviors, sheer willpower probably won’t be enough for change. You may need a trusted guide to help you explore the history behind the behaviors. Engaging the help of a financial therapist, financial life planner or a psychotherapist with some expertise in money issues is a good place to start.

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Rick Kahler, MSFP, ChFC, is a pioneer in integrating financial planning and psychology. He is a 2019 recipient of the InvestmentNews annual Innovator Award and one of Investopedia’s top 100 most influential financial advisers. He is a distinguished adjunct professor at Golden Gate University and a co-author of four books blending financial planning and therapy.



Why Knowing Your Client Is Key to Success

There’s a hairdresser in Arvada, Colo., who likely knows more about her clients than their doctors. She listens to them and makes them feel valued. She’s honest with them when pixie cuts aren’t right for their face frame and her referral business is booming.

Getting to know your clients and making them feel you are in tune with their needs is key to more referrals and more business growth, according to a 2018 study. Also key is being comfortable with tension.

The “Know Your Client” benchmarking study by FPA, Capital Preferences, and T. Rowe Price found that clients might respect and like you more when you are a “behavioralist”—someone who tells them in a diplomatic way when they say one thing yet do another.

A behavioralist, the study noted, is a planner who has “will, skill and means” and can handle tension productively. This leads their clients to appreciating their honesty, referring them to more people and it results in more business growth, the study found.

But planners have to know their clients well in order to pull this off.

“The better we know and understand our clients, the better we are at providing financial planning services,” Frank Paré, CFP®, chair of the FPA board of directors, told InvestmentNews. “Having a deeper understanding of our clients helps us to point out where there might be some inconsistencies in terms of what they do versus what they say. I’ve seen that where clients are looking to the future but still going to Vegas on a regular basis.”

He added that clients want to be called out when they are not acting in alignment with their goals. And although that might be tense, if a planner is a behavioralist with will, skill and means, they thrive in that situation.

“In identifying behavioralists, we’re looking, for example, at how planners deal with the tension that creeps into a client relationship. Behavioralists are comfortable with that tension,” said Pat Spenner, chief marketing officer at Capital Preferences, in an InvestmentNews article.

The takeaway is to put in the time to get to know your client, their partner and their families—including pets (ever talk to a 30-something millennial with only fur kids? Hello, unsolicited dog pictures.)

A Financial Planning article reporting on the survey noted that the sweet spot is to spend around six extra hours working to know your client and their loved ones in the first year of the relationship. That six-hour commitment led to a referral rate of 27 per 100 clients and a net growth rate of 24 percent.

Editor’s note: This article originally appeared in the August issue of the Journal of Financial Planning in the Observer section. The Journal of Financial Planning is a member benefit for Financial Planning Association members. Not a member yet? Become one today.

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Ana Trujillo Limón is senior editor of the Journal of Financial Planningand the editor of the FPA Practice Management Blog. Email her at alimon@onefpa.org, or connect with her on LinkedIn


Is Your Firm in Growth Mode?

Over the years, I’ve worked with advisers at all levels of production and from all types of firms. Most tell me they are very busy—and they truly are. But as I often mention in our consultations, you don’t ever want to be too busy to grow.

Of course, most advisers have active day-to-day schedules. But at the end of the year, many haven’t added any new clients. They usually come to that realization when something goes wrong: several large clients pass away or assets are transferred away unexpectedly. Suddenly, they are interested in prospecting and gaining referrals, but those skill sets may have withered away from lack of use.

Having a firm culture that promotes growth is also tremendously important in attracting great staff and retaining them. Have you ever heard of someone eager to work in a place where everything stays the same, where there are no plans to expand, and where it’s basically as good as it’s ever going to get? Me neither. Growth in a firm benefits everyone—from advisers, to service folks, to support staff and operations. Practices in growth mode present opportunities for personal and professional development. Clients also benefit, as firms add resources and skills to their offerings.

Which brings me to your plans for growth in the years ahead. It’s okay to be particular when accepting new clients and to tailor your business to segments where you add the most value. But if you’re not growing, you’re dying (as the saying goes).

Since so many advisers are skilled planners, I’m taking it as a given that many of you have business plans that are thoughtful, strategic and in writing. (Let’s also assume that your entire team was engaged in the process of developing these plans.) To help determine if your firm is truly in growth mode, think about the past three to five years and ask yourself the following questions:

Did You Meet Your Growth Rate Goals?

If yes, why? Take a look at where you set realistic and stretch goals, and then spend some time thinking about where you succeeded. Did you undertake a marketing initiative that brought in prospects? Did you host an event where clients brought guests? It’s important to analyze where you’ve had favorable outcomes so you can build repeatable processes. It will also help you figure out what exactly in your team’s skill sets led to those positive results. For example, if your staff excels at putting on events and you meet great prospects that way, build more workshops and events into your calendar.

If you didn’t meet your goals, why not? Were you overly optimistic on a few RFPs you sent out, or did the pace of referrals slow down? Were prospects looking for expertise or services you don’t offer? Did you lose more clients than expected? The knowledge you gain here will be enormously helpful moving forward. The idea isn’t to blame anyone (either yourself or a team member). Rather, it is to learn from your experiences so you can plan ahead strategically.

One adviser I work with had three great prospects who came in to see him. Each had been very positive about working with him. But after the meetings, they all decided to go elsewhere. The adviser and his team spent some time assessing why and how they lost the prospects. They came to the realization that they needed to redo their office space. High-net-worth prospects didn’t appreciate the copier’s prominent position in their reception area, and the dingy carpet didn’t communicate the exclusivity they wanted to convey. A year after upgrading their space, they are again turning those prospects into ideal clients.

How Many New Clients Did You Add Each Year?

This is a pretty simple question, but I’m surprised how frequently advisers can’t answer it. Can you? You get bonus points if you track this information and can answer quickly and easily. Tracking new clients (e.g., who referred them, how you met them, how they progressed through your pipeline) allows you to understand where your new clients are coming from, so you can duplicate the process that attracted them.

Adding new clients to your practice is one of the surest signs of growth I know. It’s nice to say that you have 10 percent or 15 percent growth year over year. All too often, however, that’s due to market appreciation of assets. What happens when the markets work against you? You want to continually add clients to your practice, both for the new assets they bring in today and for the pool of prospects they might introduce to you in the future.

If you can, try to involve your staff. One adviser I spoke with gives his staff colored sticky notes to keep near their phones. If they hear a client say something that could lead to a referral (e.g., “My brother is moving to town”), they jot it down. The notes are then discussed at staff meetings and follow-up opportunities identified. Even if your practice is at the point where you don’t need many new clients (lucky you!), you should still be looking to add a few large, ideal clients every year.

How Many Introductions Did Clients or COIs Give You?

This is another metric that is worth tracking carefully. You should have a good handle on how many introductions you receive. A steady stream of referrals is a vote of confidence and worth noting, while a dwindling referral supply can indicate potential problems. Tracking helps ensure that you thank all the referees and helps you understand how many prospects you need to meet in order to gain a new client. Do you have a 4:1 closing ratio, or is it closer to 2:1? Understanding your key metrics helps you keep your pipeline full and manage client onboarding.

So, Are You in Growth Mode?

In evaluating your answers, does it seem like you are in growth mode? If you couldn’t quickly and easily respond to these questions, you may have your answer. But if you’re looking to create a culture of growth at your firm, there’s no time like the present to begin.


Kristine McManus is chief business development officer, practice management, at Commonwealth Financial Network®, member FINRA/SIPC, the nation’s largest privately held Registered Investment Adviser—independent broker/dealer. Since joining the firm in April 2014, she has been working with affiliated advisers to grow their top line through the introduction of various programs, tools and coaching. Kristine holds the Chartered Retirement Planning CounselorSM designation, a master’s degree from Pennsylvania State University, and a BFA from Adelphi University.