Kate Pizzi, Managing Director, Investment Advisory, at Hooker & Holcombe, and the Toughest Question She’s Heard
Ask any parent: No matter their child’s age, they never stop wanting to protect them.
Often this instinct extends to safeguarding their finances. Many parents set their kids up with emergency credit cards and bank accounts and save with the intention of leaving their progeny a nest egg. But what happens when life gets messy and well-laid plans go awry? Adult children can encounter big problems: a bad marriage, illness, addiction, business debt. These unexpected events often require unconventional plans, and that’s where financial advisors are in a unique position to help.
We’re asking some of the best and brightest financial advisors to share the toughest questions they hear from clients, as well as how they’ve helped. This month we talked to Kate Pizzi, managing director, investment advisory, at Hooker & Holcombe in West Hartford, Connecticut.
Here’s the toughest question she’s heard from a client, and why the counterintuitive answer is sometimes the best one:
“I had clients whose daughter was in an abusive relationship, both physically and mentally. And like any parent in that situation, they were worried sick, felt utterly powerless and at the same time were looking for absolutely any way they could help. At the same time, they had saved a good amount of money and were eager to get it to her so she would have the funds at her disposal when she was ready to leave the marriage.
“But there was another problem: The abuse was not documented in any way. The daughter never called the cops, never filed a police report and in general tried her best to keep the abuse secret. In Connecticut, unless the abuse could be proven, her husband would have a strong claim on any marital assets in the case of a divorce.*
“When dealing with emotionally sensitive issues like this, you have to get under the hood gingerly, and you have to get to work, methodically, thoughtfully, weighing all the options.
“The parents’ preferred method was to open a secret account in their daughter’s name that she could readily access when needed. But any way you sliced it that was a bad choice that didn’t solve the problem. And if it was discovered in the course of a divorce, the court could determine the funds to be marital assets and possibly award some of the money to her abusive husband. The best course of action was to do the exact opposite: Any money they wanted the daughter to have could not be in her name; the account would need to remain in their names.
“It was a counterintuitive answer, especially to parents who wanted to empower their child. Advisors have to be willing to be counterintuitive. These parents wanted to give — what parent wouldn’t? And we were telling them they shouldn’t. But by holding on to their own money, it ensured that the funds would be available and able to be used correctly when needed. It takes explaining, but that’s our job.
“Also essential was making sure they had experienced legal representation, because it was still possible that the marriage would outlast the parents. So we called in a great estate lawyer to help the parents draw up a trust, which is a very efficient way to make sure your wishes are respected when you pass on. Lastly, we urged them to make sure their daughter had a competent divorce lawyer.
“When it comes to kids, parents understandably would give their last penny if they thought it could help their kids out of any situation. But often the best thing parents can do is make sure their own financial house is in order first. That’s a point we can’t stress enough. If you have the assets and a good plan, you are in a better position to help your children get through life’s ordeals.
“When the parents left our office, we hadn’t rescued their daughter. But we worked hard to do everything we could do to empower them to help her down the road. When you come up against a situation like this, it’s a reminder that we deal with real people living real lives. We see the good, the bad and the ugly. And as trusted advisors, we are in a great position to make a real difference.”
*Laws vary by state. Individuals should consult with a legal professional regarding their unique circumstances.