How Financial Advisors Can Help Clients Successfully Navigate Career Changes

The possibility of changing jobs, whether voluntary or involuntary, is on the minds of many workers today.

The percentage of people who believe they will likely lose their jobs in the next four months has recently reached a record high A study conducted by the Federal Reserve Bank of New York consumer expectations that date back to 2014.

Financial advisors who have experience helping clients successfully transition into a new phase of their careers say that figuring out what’s important to them can help clarify the steps they need to take to prepare for the change.

Understand what is important

Amy King, Founder Instar Financial Planning in Fallston, Maryland, began her military career in the U.S. Naval Reserves in 1994 and served more than 22 years on active duty as an officer in the U.S. Army. After retiring in 2019, she became a financial advisor. Most of her clients are service members preparing to transition to new careers, so her work typically involves preparing for those changes. She said that while each transition is unique, some principles apply universally.

“Know what you want your life to look like after you make a career change. Just wanting to leave isn’t enough. Understand your goals and why,” she said. “Choose a job that aligns with your dream life, not just the highest-paying or first offer. Anticipate the emotional and psychological impacts of the change, including potential geographic changes, changes in family roles and how your current role relates to your sense of identity.”

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David Flores Wilson, Managing Partner Sincerus’s Advice in New York, said that because most of his clients are in their 30s and 40s, career changes are a priority for them. One exercise they do is identify 50 values ​​— such as meaningful work, family and charity — and ask them to pick their 10 most important values, then narrow them down to their five most important.

“As career transition plans become more tangible, we will be sure to update financial forecasts and run various income scenarios to identify any likely earnings declines in the near future,” he said.

Wilson said he’s seen this happen with clients who left a large tech company like Meta or Google to start a startup they were passionate about.

“Projections can ease stress by providing clarity on whether a lower income level is feasible and what pace of spending you need to sustain financial independence while pursuing change,” he said.

Set up an emergency fund

Andrew Fincher, Financial Advisor for VLP Financial Advisors of Vienna, Virginia, said that typically, if clients are still working, they make sure they have an adequate emergency fund, as well as any insurance and benefits, to cope with such a change.

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“It’s certainly easier when a client is planning for a transition because we can plan a navigation strategy,” he said. “If it’s an emergency, we set up a meeting to discuss cash reserves, whether any money needs to be withdrawn from the portfolio to be replenished, and then we go over any paperwork, like maintaining COBRA coverage. As soon as they get a new job, we review all the new benefits and make sure they’re enrolled in all of them.”

King said it’s important to fully fund a six- to 12-month emergency reserve, saving enough to cover a potential pay gap and double your estimate.

“Adjust your spending to anticipate any changes in income,” she said. “Understand changes in benefits and plan for any gaps. Assess the impact on long-term goals like retirement and education, especially if you leave a pension behind.”

Like Wilson, Rebecca Conner, founder and chief planner at Financial SeedSafe in Bainbridge Island, Wash., works with technology professionals who want to break out of a rut and move into a fulfilling second act. That financial planning typically begins and ends with a spending plan, Connor said. If a client is willing to wait a few years, he’ll move to a balanced spending budget based on his future income and make sure he’s ready for what that change will entail.

“We’ll then use the additional free cash flow to take advantage of employee benefits that we might not have in the future to bolster their long-term financial plan,” she said. “For example, some companies offer an education budget that’s not tied to their specific role.”

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Sincerus Advisory has a network of business coaches, career coaches and life coaches who specialize in working with people going through change to help clients through the process, Wilson said. They also bring in a salary negotiation consultant when appropriate.

“When these changes happen suddenly, we do our best to quickly reassess employee goals and values, comment on any termination agreements, recommend employment law counsel if necessary, discuss the appropriate size of the contingency fund and quickly review forecasting models,” he said.

Consider upcoming salary changes

Andrew Damcevski, Founder and Financial Advisor at AJD Asset Management of Cincinnati, Ohio, said that when preparing for a career change, clients should understand their current income, lifestyle and expenses and how they compare to their future income.

“The more clarity we have about future roles and earning potential, the better we can plan,” he said.

For example, Damcevski said they often help lawyers working at large law firms plan for their exits into in-house counsel positions, usually with lower starting salaries. He said they try to minimize the shock by saving for “income replacement,” or having a well-funded savings account from which they can withdraw each month to supplement their net income with their new, lower salaries.

“It’s not a permanent solution, but generally speaking, living expenses depend on income,” he said.

Conner said that if a client gets laid off and now wants to change jobs, they immediately assess their “baseline expenses,” look at their cash and liquidity situation, and then consider how much time they have left to implement the next steps toward a career change.

“We do this routinely with clients when they achieve ‘financial flexibility’ through an IPO or a company’s public offering,” she said. “We like to ask, ‘Now that we have this additional investment cushion, what’s possible?’ By digging deeper into the life side of things with clients, we can learn what they value in their careers and understand their purpose. Then we tailor financial plans around how to get closer and closer to that fulfilled life. We’ve learned that taking the lead in life planning is the best way to help clients achieve their financial goals and live a life that works for each of them.”

Uziel Gomez, Founder Primeros Financial in Los Angeles, said that when preparing clients for a career change, it’s important to carefully examine the compensation structure and consider its long-term trajectory. This includes examining their base salary, benefits and any additional compensation, as well as non-financial factors, such as job fulfillment.

“Meeting others in a new industry can provide valuable insight into the profession and help clients make informed decisions,” he said.

Updating your spending plan is also crucial, Gomez says, especially if your new job comes with a pay cut.

“I’ve seen that it’s easy to say you’re going to take a pay cut, but it’s a whole other thing to adjust your lifestyle to accommodate that,” he said. “I highly suggest simulating the financial impact of that pay cut before making the change. This simulation helps clients understand the lifestyle changes they need to make and make sure they’re prepared for the change.”

King said the most important lesson she has learned is that emotional and mental changes are often as challenging as financial changes.

“Managing the emotional side well when faced with unexpected change can lead to better overall outcomes, including better financial outcomes,” she added.