When Wealth Triggers Worry: Advisors Explain Clients’ Biggest Financial Fears

(Illustration by Wesley Allsbrook)

From family squabbles to inflation and FOMO, advisors reveal the frights that keep their wealthy clients up at night, and how they try to help.

A financial windfall or hard-earned nest egg can ease many worries. But more money often brings with it new kinds of anxiety. Even the very wealthy fret over everything from strained family dynamics and outliving their savings to the specter of inflation and the prospect of missing the next big investment trend.

For this Guide to Wealth, Barron’s asked several financial advisors to describe the top fears of their otherwise comfortable clients, and how they calm their worries.

Fear of Going Broke

Martha Callahan, portfolio manager, FBB Capital Partners

Martha Callahan, portfolio manager, FBB Capital Partners (Courtesy of FBB Capital Partners)

I often speak with clients entering retirement who are worried about whether they have saved enough money to enjoy the same lifestyle in retirement as their working years. They have worked their entire adult life and saved diligently, and when the paycheck stops, they often find it stressful to begin drawing from their investment accounts. They want to travel and enjoy life but are worried about running out of money. That generates a lot of stress. We do a lot of retirement cash flow planning for clients, projecting income and expenses and how those are going to affect their investment portfolio over time. It’s not a perfect science, but it does give clients some comfort as they look toward their retirement future.

Reassuring clients comes down to communication and trying to illustrate what their financial path looks like. It sometimes takes many conversations. But you want them to enjoy life. You want them to go travel and have fun, now that they have the time to do all those things. Sometimes it’s as simple as just encouraging them to take that trip, to live a little.

Postwindfall Weirdness

Adam Katz, wealth advisor, head of the entrepreneur and founder practice, Corient

Adam Katz, wealth advisor, head of the entrepreneur and founder practice, Corient (Courtesy of Corient)

As an advisor, I’ve co-piloted hundreds of [company] founders’ journeys and dozens of notable exits [when those founders sold their businesses]. After these events, other people’s expectations change. When someone is raising money for charity, the number that’s expected from you starts to change. If it’s your niece’s bat mitzvah, it’s suddenly like: Are you supposed to give $18,000 instead of $360?

You start seeing people create a judgment mind-set of “I’m surprised they’re going to that resort” or “I’m surprised they bought that car” or “I can’t believe they’re not on the list for the church’s annual donation.” So much judgment and expectation can accompany these exits. [Founders] are really scared about all that.

One of the rules I give clients is to overcommunicate, so as to not leave too much air for other people’s narratives. You might say, “Hey listen, as you know, I had a really fortunate exit, and here’s exactly how I’m thinking of helping you guys.” Try to eliminate the ambiguity.

Setting Off a Family Feud

Alvina Lo, head of advice planning and fiduciary services, BNY Wealth

Alvina Lo, head of advice planning and fiduciary services, BNY Wealth (Courtesy of BNY Wealth)

Something we see a lot, especially with business-owner clients, is fear of not treating loved ones “equally” and creating family strife. For those with multiple children, especially in blended families, how to treat each child equally can be a difficult question. The last thing clients want is for the wealth they worked so hard for to end up creating disharmony at best, and litigation at worst.

We all love our kids equally, but the reality is they have different needs and wishes. And at the end of the day, equal doesn’t always mean fair. Maybe one kid borrowed a lot of money from mom and dad early on. Or the parents bought them an apartment. Other kids might be more self-sufficient. In the case of blended families, you could have children who are 15 or 20 years older than the youngest. In that case, dividing the assets equally looks good on paper, except for the fact that the older child had the benefit of extra years of support.

The key is to communicate with the kids while you’re alive, to explain the reasoning behind your inheritance decisions.

Investing FOMO

Chris Zaccarelli, chief investment officer, Northlight Asset Management

Chris Zaccarelli, chief investment officer, Northlight Asset Management (Courtesy of Northlight Asset Management)

Some clients feel there are other things out there beyond a diversified portfolio—opportunities to increase wealth faster, investment themes that are important to jump on early. In the past, we’ve seen themes around marijuana distribution and clean energy, for example.

One theme this year is artificial intelligence—the chip providers, software makers, data centers, and power support for those data centers. Another theme is nuclear power, which has had a renaissance in people’s minds. Because unlike wind and solar, which are intermittent depending on what the weather is doing, nuclear is a very efficient, reliable, noncarbon energy source that’s as clean as it gets from an emissions point of view.

By the time retail investors are aware of these kinds of themes, we’ve usually already gotten into them within our individual equity portfolios or our more diversified fund portfolios. A lot of times, our clients already have exposure and just don’t know it. For clients who believe so much in a theme that they want additional exposure, we might carve out a portion of their portfolio where they can experiment or trade or take additional risk. We often can find an exchange-traded fund or other type of fund that will have a basket of those companies. The key is to make sure clients are feeling heard and that they’re getting what they want. But you clearly don’t want your entire retirement portfolio to be dependent on themes.

Inflation and Stagflation

Britt Whitfield, executive managing director, Callan Family Office

Britt Whitfield, executive managing director, Callan Family Office (Courtesy of Callan Family Office)

If you get a resurgence of inflation, and the Fed has to really start raising interest rates, there’s a real fear that the economy is going to slow in a material way. A lot of the clients I work with are also business owners, so there’s some concern around how that might impact operating businesses. The idea with stagflation is, what if you see a rise in consumer prices while the economy is slowing at the same time? If the Fed cuts rates too quickly and deeply, there could be inflationary impacts. If the Fed has waited too long, combined with other forces such as tariffs, the economy could continue slowing while prices are rising. Those are the conversations clients are having with us.

In an inflationary environment, risk assets such as equities, and hard assets such as diversified real estate and diversified commodities, have historically been good hedges. You don’t want to own a lot of long-term bonds, that’s for sure. You want shorter-term bonds. For the stagflation concern, diversification with tax-exempt bonds with attractive tax-equivalent yields is wise. Hard assets, value-priced equities, private equity, and hedge funds are helpful.

Losing Your Identity in Retirement

Gordon Whittaker, wealth management advisor, Merrill

Gordon Whittaker, Wealth Management Advisor, Merrill (Courtesy of Merrill)

Whether you’ve exited from a business via a sale or you’re a corporate executive and it’s time for you to move out of your role, figuring out financial security is the easy part. The underappreciated part is what leaving that job means in terms of your identity.

If your work has long defined you, stepping back can feel like losing a part of yourself. If that isn’t addressed ahead of a transition, and even when it is, it ends up being really challenging to work through. We have seen so many examples of this that we now include the topic in our pre-exit client reviews. For that meeting agenda, I include the two words “Monday morning.” I tell clients, “You’re leaving your company. You’re ceasing your life’s work. What are you going to do Monday morning?” It’s proverbial—the first Monday morning, they’re going to go on a trip, they’re going to spend time with their grandkids, things like that. But what’s going to get you out of bed in the morning down the road?

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