Clients in their 40s and 50s are often at the high point in their careers in terms of their positions and compensation. Unfortunately, job losses for those in this age range are not uncommon. As companies look to reduce staff, they often look to these workers when it comes time for staff reductions.
Your clients in this age range should be prepared for a potential job loss, both financially and in other ways. Some recent data show that this situation is far more prevalent than many people think, especially with the economic contraction from the COVID-19 pandemic. Here are some thoughts on what financial advisers can do to help their clients be prepared if this happens to them.
Financial Planning Issues
While not being alarmist to your clients, you should have a periodic conversation about this possibility. An assessment of where they stand in terms of their retirement savings goals is a good first step. A review of their liquidity in case they have to tap into some of their accounts to cover their short-term cash flow needs is also an important step.
A part of this process should be a review of both your client’s employee benefits and any stock-based compensation they may be entitled to. The former should include a review of their employer’s stated severance benefits if they are accessible to your client. In the event of a company downsizing, your client may receive a sweetened separation package in the form of a buyout offer, but the basic severance benefits are a good starting point. The main component here is likely the number of weeks of severance pay based on your client’s time as an employee.
If your client receives any sort of stock-based compensation such as restricted stock units (RSUs) or stock options you will want to be sure that you have current information about these plans on a regular basis. It’s especially important to be current on any vesting requirements or time requirements for exercise in the event of termination from employment.
In discussing the topic of a job loss in their 40s or 50s with clients, it’s a good idea to discuss the potential short and long-term impact on their financial situation. Part of this conversation should be to ask them what their potential next steps might be were this to happen. The idea here is to get an idea of whether they might look to find another position as an employee somewhere, or perhaps if they would consider going out on their own at this point in their life. You might also encourage them to take a few steps to help them be prepared professionally for a potential job loss.
It’s important for you clients to keep their business network current. You should encourage and remind them to do this on a regular basis. Professional contacts can be invaluable if your client decides to find another job. These might be people within their industry, it could be consultants or other vendors they deal with or other business contacts. In the event that your client is laid off, their network of contacts can prove invaluable in terms of career ideas and perhaps even a link to other opportunities within their network.
This is the case whether your client is looking to find a similar position with another employer or if they are looking to move into something a bit different. For example, if your client is a corporate accountant, they might want to use their skills and experience to move into a position with an outside accounting firm. Or perhaps your client is an in-house lawyer on the corporate side and wants to move to working as an attorney in a law firm. Their network can likely help in these and countless other career transition scenarios.
Keeping Skills Up-to-Date
It's also important that your clients keep their skills fresh. Whether this is in a technical area like legal, accounting or technology, or whether it is their industry and product knowledge, staying up-to-date will be an asset as they look for another opportunity. Especially if your client has been in the same company and same department for a number of years, they will want to be sure they have transferable skills and expertise needed to pursue other opportunities.
Preparing your clients for the possibility of a job loss in their 40s or 50s is important as the trend of job losses for workers in this age range is increasing. This preparation includes both traditional financial planning issues and well as ensuring that your clients are prepared professionally to make a change if needed. Both are critical to their financial well-being in trying to move on from a job loss.