The following content originally appeared in the article by Austin Kilham in The Wall Street Journal on October 23, 2015.
Mediating a Family's Financial Conflicts After a Job Loss
An adviser helped a teen's parent's balance the desire to pay for college with their money needs
Emotions were running high between a husband and wife in their early 50s after he’d lost his job. They had a son nearing college age and now felt they had to choose between covering current expenses, saving for retirement or funding college.
The wife was adamant that they prioritize paying for school because they had said they would. She was angry at having to choose. Meanwhile, the husband was embarrassed about his job loss.
Lauren Klein, the couple’s financial adviser of five years, saw that communication was breaking down. “The situation was becoming intractable and required care and a process to deal with the conflict,” says the adviser, whose Klein Financial Advisors Inc. is based in Newport Beach, Calif., and manages $60 million for 67 client families.
Ms. Klein uses a method for family mediation derived in part from her training as a divorce financial analyst. Having a process helps the group systematically look at a conflict and break through established thought patterns, while keeping everyone on track to find a solution, says the adviser.
First, she called the couple and son together, and had the family lay the ground rules for the session, which included making sure everyone listened, didn’t interrupt and kept information learned during the meeting confidential.
Next, she had each family member describe the situation as he or she saw it, including why they thought college was important and, in the son’s case, whether or not he wanted to go. This way the family could make sure they were on the same page. The parents agreed that they wanted to help their son, and the son agreed that he wanted to go to college.
After looking at points of agreement, the group looked at points of conflict and brainstormed options.
For example, they contemplated having the son go to a community college for two years and then transfer to a four-year program or having him work for a year to save money for school. They considered whether he could go to the local state school and live at home or go to one California’s state universities. And they suggested combining an existing 529 college savings plan with loans the son would take out personally. These options would allow the parents to direct their income toward current expenses and, if there was enough left over, resume saving for their retirement.
Through the mediation, the son was able to understand why his parents had been on edge and assure them that he was willing to work with them when it came to his schooling. The only options the family decided they didn’t want to pursue were having the son delay school to work and having him live at home while attending state school.
With the knowledge that they had multiple options, the couple felt comfortable making a decision. They stopped funding their son’s 529 plan. They now use the money they would have put in the plan to cover the family’s living expenses. They plan to reassess their situation when the husband finds new employment and, at that point, begin saving for retirement again.
The mediation process helped to open the lines of communication within the family, says Ms. Klein. “As advisers, we always say we’re dealing with feelings, but a lot of people are afraid to address feelings because they do not have a process,” she says. “Having a set track helps rein in the conversation to make sure you stick to your agenda and find a solution.”
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