Financial Planning for Clients Changing Careersby
Whether your client is considering leaving their job to pursue self-employment or a brand-new career, they'll need help coming up with a roadmap to their dream job. In this article, Bryce Sanders offers 10 questions to ask these clients to start their financial plan.
It’s been said that a person will have 12 jobs during their lifetime. The days of lifelong loyalty to one employer may be history. If your client has decided to change careers, from a financial planning standpoint, you can help them to be realistic without being a downer.
Changing Jobs vs. Changing Careers
In the late 1990s, software developers in Silicon Valley were in high demand. Someone once said that to change jobs in Silicon Valley, you simply needed to pull into a different company’s parking lot in the morning. But let’s say your client isn’t thinking about simply changing employers to do the same job. Perhaps they are leaving a large firm to join a smaller firm or enter private practice, or leaving an established firm to join a startup. Maybe they are considering a different career affiliated with their profession. They might even be considering a complete career change, from engineer to restauranteur. This change might be a second career. How can you advise them?
Ten Questions to Consider
You want to strike a balance between being supportive and cautious. Here are a few questions to ask your client:
How did you reach this decision? There are many professions to choose from. What factors played into this decision? Has your client done research ahead of time? You'll want to get some background information.
What’s the plan? Some people change careers out of a desire to make more money, or they feel their current profession offers limited career advancement. If they’ve decided to start a business, join an existing one as a partner or embark on an entirely different profession, consider what has to happen before they realize their goals. Can they articulate the next steps and how long the plan will take? Sometimes, when people explain their career plans aloud, they realize the enormity of the task and reconsider.
Are you buying an established business? Let’s say your client wants to be their own boss and intends to buy a bar or get a restaurant franchise from a major chain. This will require money and financing up front. How has the value of the business been determined? You want to know your client has thought ahead and determined how much capital is involved. The valuation of the business is critical.
Are licenses or additional education required? If your engineer client decides they want to become a lawyer, they would obviously need to get a law degree. If they decide to become a real estate broker, they need to get licensed. Roughly one in three professions in the United States requires some type of license. Your client might not realize they must earn certain qualifications before setting up shop. This could result in a period of time when they aren’t getting paid or aren’t earning to their full potential.
Is it a sales job with an attractive title? In certain jobs, compensation is based on how much revenue the employee brings in. This means gaining new accounts and bringing in assets. Real estate agents are paid on commissions earned from properties sold, for example. Sales is an important component of the job. If your client wants to make more money and is leaving one profession to take a sales job, make sure they understand how demanding it might be. If they don’t, they could soon be in for a rude awakening.
Are you expected to bring over existing clients? If your client is taking a job where they sell products or services, they may be expected to bring clients from their previous job with them. Your client may be under a restriction that they aren’t allowed to contact former clients, or they may have signed a noncompete clause. Whethere there is an expectation might be a simple yes-or-no question, but whether they are allowed may be more complicated. If they don’t bring along current clients, will their compensation be less?
Are you becoming an equity partner? Your client might be leaving the city life at a major corporation to join a small local firm, where the structure of the firm may be a partnership. Will they be joining as a new partner? What is their expected equity contribution? Just as you can’t show up at a country club and start playing golf and enjoying the facilities without first paying an initiation fee to become a member, you can’t join a small firm as a partner without certain expectations.
Is there a probationary period? If your client is starting a new career in a different field, they are not a known entity to their new employer. There will probably be a probationary period to determine if your client is a good fit. Even if there is a contract, it may eventually expire, at which point the company has the option to retain your client or let them go.
How much cash reserves do they need? Is your client moving into a position that will pay them what they were earning previously? Will there be a period during which they aren’t paid at all? How much cash do they need to cover their bills? Compensation might not be immediately available, so they need a cash cushion in the meantime.
Is the door closed? You’ve heard the expression, “Don’t burn your bridges.” If the new career doesn’t work out as expected, can your client return to their previous firm? Your client might need a Plan B in case their new job doesn’t work out, so your client should try to leave their current job on good terms.
It takes courage and initiative to change jobs or start a new career. As an accounting professional, you can help these clients make decisions with their eyes open.
Bryce Sanders is president of Perceptive Business Solutions Inc. in New Hope, Pennsylvania. He provides high-net-worth client acquisition training for the financial services industry. His book, Captivating the Wealthy Investor, can be found on Amazon.com.