Aileen Schruth: Financial Planning for Divorcing Clients | Next Gen

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Welcome to Barron's Advisor: The Way Forward Next Generation, a special series spotlighting the emerging leaders shaping the future of financial advice. Twice a month, we'll be digging into the strategies, insights, and game-changing moves that will help you take your practice to the next level. I'm your host, Allison Tucci, and today with me is a financial advisor from UBS named Aileen Schrooth with $5.5 billion assets under management between her and her team. And what we're going to be talking about today is how you can specialize to help grow your practice. I want to just jump right into it. Can you share how you became a specialist in divorce financial planning?

Okay, so a long time ago, 2003, I was an intern at UBS on the municipal bond trading floor. And I knew that I loved the industry and the energy, but did not want to be in muni bonds.

Okay.

And I was lucky enough to be a part of Wall Street Women.. And they would have successful women come in and speak to us. And every week there'd be a different topic. And when the financial advisor came in, I said, "Oh, that's exactly what I want to do." So then I got started and they gave me a phone book and I dialed and dialed and dialed. And I would have to make a million, maybe not a million, hundreds of calls to get someone on the phone. A lot of people would hang up. Some people would come to my lunches. They would come just for the meal. Some people would come and take a meeting. Some would turn to clients. And so I realized that the phone call process was not what I wanted and I needed an expertise. So at first I started with my CRPC. Okay. Chartered Retirement Planning Counselor, then a CFP, Certified Financial Planner. And then I moved on to the Chartered Divorce Financial Analyst. And I'm actually also a CPWA. So it was, the divorce was realizing that I wanted a specialty and I wanted a focus.

What made you really have the propensity to sort of dive into that?

So I have been on the same team at UBS since 2010 with a woman who started the business in 1983, another woman who joined her in 1998. So because we are a female-led and female-focused team, we wound up having many clients either going through divorce and staying with us or after divorce coming to us. And so initially, it was just our practice had those people. And I enjoyed working with them and enjoyed empowering them and educating them. And then I thought I could really get a specialty here. And that's when I got the CDFA.

Okay. So for those that are listening right now, they might not be, you know, hoping to get a divorce, but it could be somewhere on the horizon. At what point should someone really engage someone like yourself with that planning process?

So well before anything happens.

Well before that first therapy session. Exactly. Exactly.

Okay. But I, um, I work with many different generations of clients. And so I play the bad guy all the time. Okay. When, you know, G1, Generation 1 will say, oh, my son or daughter is getting divorced. And I'll say, great, who's talking about the prenup?

Me or you?

Great.

You're like the only person that says great.

You and the attorney. And not everyone does it, but I think it's important to have the conversation and understand the pros and cons. And then I also work with a lot of successful wealth creators. And then I'll say, hey, you should think about a prenup or, sometimes a postnup, if that makes sense too.

So you work, I'm assuming, alongside a lot of divorce attorneys, etc. Can you explain that relationship to me?

So I love getting brought in well before the settlement happens because it's really important to understand what your balance sheet is today and what it's going to look like on the other side, what your expenses are today, what you can afford to do. I think I have a recent example of a client I worked with, and it was a husband and wife who have a business together. Oh wow.

So that's difficult.

Yeah. And they also had a very expensive property in the city, expensive in value, but also expensive to maintain. So I did a million iterations with the client saying, you know, what is, now that you are breaking up your business, what does the business need to generate to have your lifestyle work? Or can you afford this property with your variable income? Can you qualify for a mortgage? And then kind of getting to her values and what's most important for her, how she wants her kids to live and what she can live without. So really, doing so many different financial planning scenarios. And it's never for me to say this is my recommendation, what's right or what's wrong, but the different levers you can push and figure out what's better on the other side.

Are there any consistent levers that can be pulled or indicators that a client should be thinking about before they really walk into your office?

Each of these is so different, all the way to the point that I have a lot of happily divorced clients. And I'm still working with both the wife and the husband. And there's financial planning around that too. Who pays for what? And how do you strategize across two different separate balance sheets? So everything is so different. I would say one consistent is trying, which is so difficult because it's such an emotional time, but try to remove the emotion. Because there can be items on the balance sheet, be it the primary home or the beach house or art or company stock that you accumulated yourself and you don't want your spouse to get. I mean, so many different emotions. But then if you can do the financial plan and see in black and white, if you tie so much importance to this emotion, you might be missing out on something that could make you happy.

Or not.

And then you dig your heels in and go for it. But at least you've modeled it out and see what makes sense.

So any tips or tricks with trying to figure out how to take away that emotion? I mean, it's probably one of the most emotional times in someone's life is going through a divorce. So how do you— would you say take that out of the conversation?

Well, I mean, someone more qualified to deal with the emotional, psychological aspect. But I do think it's the financial plan because it's in black and white. And, you know, the plan's only as good as the inputs. But it does show you if you keep the home, if you keep the portfolio, if you do this or that, how different life will be down the road. And then, and then maybe you're still emotional, but at least you understand what you're giving up to hold on to something else.

How do you help clients not make a fear-driven decision? It sounds like you put the financial plan in front of them. You run multiple scenario analysis. To walk them through it, but are there any sort of best practices that have worked so far?

At UBS, we have a framework called the 3 L's. It's called liquidity, longevity, and legacy. And it's simple, but I think it makes sense and helps people really kind of think about their money in this bucketing approach. So there's a liquidity bucket. It's the short-term funds. Longevity, it's for your lifetime. And then the legacy is either family members, friends, or organizations you want to benefit. And once I get my clients to get the right liquidity bucket, they can make much better decisions with their longevity bucket, their portfolio, getting invested, staying invested. And then a discussion I have with female clients sometimes is that this liquidity bucket can't be too big. Your fear can't drive you so much that you miss out on opportunity— there's opportunity costs. You're missing out on market returns. You need growth. You need to outpace inflation. So I think the bucketing really helps us avoid that, those fears.

And it sounds like you have— Reduce those fears. Reduce those fears. Yes, exactly. And it sounds like you have a big focus of your business on the women's side and women entrepreneurs and women executives. And it sounds like them going through a divorce, I would say, is probably dealt with in a slightly different way. What are those sort of different areas that a female should consider as they're going through divorce versus a man?

I actually don't think the gender affects it. Okay. I think maybe some of the conversations can be harder. We're not really taught to say, hey, I need a prenup. I have a private business. It's going to go public. I have all this company stock. So maybe people are less comfortable talking about it. But my advice really would be the same, is that you need to protect your balance sheet, and that can make things easier down the road.

In terms of, you know, the other female clients that you have, it seems like you are working with executives and you're working with folks that have also potentially inherited their wealth. Kind of break down with me the balance of your book and the differences in characteristics and how you would approach each of those different bodies or populations.

So my practice is interesting because I feel a lot of next-gen advisors, they're either the salesperson that brought in the business or the financial advisor who inherited a business and grows it and maintains it. But mine really is about 50/50. And so I work with Sharon Sager, Hillary Cullen, two amazing female financial advisors who grew the book. And that's really the group that's the inheritors. And then the clients that I've brought to the firm tend to be the wealth creators. And what I found is really interesting is you could have a 40-year-old with $10 million in Group A and a 40-year-old with $10 million in Group B. And the wealth inheritor is so focused on the investments and maintaining that portfolio, the dollar amount, the spending power. Versus the wealth creators really focused on financial freedom. How do I get out of this incredibly stressful job but maintain my lifestyle? So it's more planning strategies. So it's— I found that those two groups are really different, even if it's the same age, same portfolio size.

You're listening to Barron's Advisor, The Way Forward: Next Generation. We're going to take a short break. Stay with us. Model portfolios are no longer one size fits all. In fact, 85% of investors want financial advisors to deliver models customized to their individual goals, investment preferences, and tax circumstances. Discover some of the top themes driving the shift in Seizing the Next Model Moment by BlackRock. Welcome back to Barron's Advisor: The Way Forward, Next Generation. Let's get back into the conversation. Tell me a story about a successful time that you brought over a client.

So I've been very fortunate to have a group of, I call them young clients. And as I'm aging, my definition of young keeps changing. But for me, they're the younger clients because they're the creators and they didn't inherit it. And I have gotten these really deep relationships. And I'm their first call for all financial advice. And then it's this very virtuous cycle that they refer their friends and the colleagues refer them. Because I would say something that I hold them accountable. So we go through the financial plan. They say, "I need to retire by 50," or, "I want to get this beach house," or, "Start a business," or whatever your financial goal is. But a financial plan is only as good as the execution. So I hold them accountable. And I have one client who calls me the Iron Lady. And I have another client who calls me— it's inappropriate language, but a powerhouse woman telling her what to do, but more colorful language than that. And so I'm just really holding them to task. If you want to retire by 50, I'll tell you how to get there, but you've got to do the work. And I think they really enjoy that because I know they've talked amongst themselves and said, oh, call Eileen. She'll get you your plan. She'll like figure it out so you can have that financial freedom.

Okay, so how does the Iron Lady do this? Do you show up to their—

Yes, basically.

You just pound the table? Or how do you hold them accountable?

So we have quarterly meetings. And I check in and I say, what did you do? And then, I mean, again, I'm not their mother. I'm not a taskmaster. But if you said this was important, I'm not dictating your goal. But if you told me that's important, let's stick to it. Or you can change your goal. Know that this is what you need to do to get there.

And are there some questions that you've asked to really pull that out? It sounds like your, your client community is actually very tight-knit, so they might actually be coming to you with more answers than questions. But how do you really provoke that and get them to really open up?

So I have a few questions I use frequently. Mm-hmm. If there were one financial issue I could solve for you, what would it be? Okay. And then really make them talk and keep talking. What are you worried about or what keeps you up at night? And really push on that. And it's surprising how much people will share or like kind of feelings about money from their childhood. And then what do you want your wealth to accomplish? And actually, this one I like with couples because one spouse may say, here's what I want. And the other one will turn like, I had no idea you wanted that or that was important. So it's kind of interesting conversations.

I love how you have that question together with a client base. Have you ever, you know, spoken to one client versus the other in a couple had separate meetings. How do you deal with that if there's, you know, complicated family dynamics?

So depends on the family structure, but I'm very happy and frequently do the husband and the wife separately. Or I have siblings who have a trust and maybe one sibling is really interested in finance or works in the industry and the other one is in a different industry and doesn't know the acronyms and all of that. And so it's You might be uncomfortable asking a question even though you're really close to your sibling or you're really close to your spouse, but I think it's nice to separate the two and have separate spaces.

Okay, separate spaces. So you're talking and engaging with both. I mean, I've heard of horror stories where financial advisors have lost clients because they've only talked to the husband and they didn't talk to the wife or they didn't engage the children appropriately. I feel like that is—

I've actually been, not to interrupt you, but I've actually been a beneficiary of that several times.

Okay, tell me more.

Well, just that The spouse will say, my husband passed away, or we got divorced, and I had, like, the financial advisor had never called me or, like, sent me a Christmas card, a holiday card. And then I'll go through my whole process in getting them educated and empowered with their financial plan. And you're like, I can't believe you weren't engaged before.

That's great. I mean, so walk me through your process of educating someone in that situation. I think a lot of advisors are finding themselves either recipients or They're nervous about even losing their client base more. So I hear the sort of the stories that you're telling me where someone's come almost disgruntled because they've had a bad previous experience with a financial advisor. How do you help that person overcome maybe the barriers they previously had and help them educate into where you need them to be, to be really a partner in their financial journey?

So it's a lot like learning a language. You took Spanish or French in middle school, high school, like your first semester, like those words didn't make sense. And then you started to hear it more and more and more, and you got better at the language. And so it's, you're not going to be able to talk about, you know, the Fed tomorrow, but we can get you and get you more comfortable. And then every quarterly meeting, you're understanding more and speaking more of the language.

So it's more about, you know, speaking the language, having that, you know, open dialogue with her financial advisor, any sort of instances where you know, you've had a conversation with one of your clients before, you wanted to help out one of their, their friends or etc., and you, you knew there was an opportunity with one of their people relationships and you wanted to ask for a referral. Have you done that before and how have you really asked for that referral or has it all been inbound?

It's a lot of inbound, but I do— my clients do know that I'm growing my business and I have an 11-person team, so I have a lot of support to grow that business. Yeah. So, and I think they, they think their friends and colleagues would benefit from working with me. So I know that— they know that I'm open for business, but a lot of it's inbound.

Okay, that's great. I hear a lot of times of advisors buying lists online or trying to find ways to grow organically their business. Have you found that maybe events, or how have you really made sure that your clients knew that they were— that you were growing your business? How did you get that brand out there in an organic way to you?

Buying the list wouldn't be a fit for me because I We try to keep our number of clients small so that we can really give an incredibly high level of service, a detailed comprehensive financial plan, a bespoke investment strategy. Our operations team does so much. So we do want to grow and we are open for business, but we're trying to do it with the right amount of people so we can continue to service our clients the right way. And I mean, I would say I spend a lot of time with my clients either socially or in those meetings. And so they do know that I, I'm still in growth mode.

So you work with a lot of wealth creators, which, as you mentioned, is a very different type of persona than an individual who maybe has inherited their wealth. For those folks that, you know, are very stressed at work, especially the next generation, our generation, they want to do almost like these mini-retirements. They don't want to fully check out. They're not fully done with retirement, but they want to take maybe a year hiatus or maybe want to build their wealth to start their own endeavor and get out of the 9-to-5. How would you help them along that journey?

So I have a wild number of clients who have done that, who've done the mini-retirement or whatever phrase we're using, take a year or two or three and then gone back to the high-stress job. But I also spend a lot of time with clients and saying, You have accumulated such wealth, you think you need to make X dollars per year, which is what you used to, but actually because you have this portfolio, the portfolio can make up 80% of your lifestyle and you could take a much lower-paying job and it still works out. I have a client who— finance job in the city and an expensive lifestyle, kids in private school, all the expenses of New York and beach house and that, but he really had this dream of this startup where he would make very little and have equity. And I showed him on paper, you don't need to have the income and you could still maintain the same lifestyle, do this and provide for your kids the way you wanted to. So I see the mini-retirements of a year or two or three. I see people leaving very young and consulting or going on boards and then also doing the startup or your own business where you might have a really small salary either. Ideally you take off, but you don't have to. You've made enough that it's fine.

Anything specific that's a tactic for those individuals that are financial professionals? Because sometimes, you know, we're both in finance, giving someone financial advice who's in finance can almost be like telling a doctor what to do with their, with their own health. Any tactics or tips specifically for financial professionals, especially those who are really thinking about that mini retirement, those hedge fund individuals, those individuals that maybe made a lump sum and are now taking a, a smaller payment or salary going forward?

Well, as you indicated, financial professionals are their own worst enemy.

The most are fighting with people.

I'm fighting with that.

I understand that, yes.

How do you have so much cash? What is going on? This is crazy. Because there's always a reason not to invest. And we know. And in the short term, you might be right. But in the long term, you're not. Again, get your liquidity bucket we talked about before. But just, I mean, I show graphs and charts to people about why you need to be invested and why you need that growth. Also, getting invested and giving up discretion to someone who's going to take the emotion out of it will allow you to not have earned income, but the portfolio needs to do its job. You can't afford to sit in cash. The portfolio needs to be working for you. So, I'm just kind of— more Iron Lady conversations, I guess.

More Iron Lady. I like that. That you would say are a must-watch for an advisor?

I mean, all anyone wants to talk about is artificial intelligence. So I guess that's up there. Figuring out both how to— what strategies to put clients in and then also how to use AI to make my business better for clients. So I guess I'm looking at that and trying to learn as much as I can.

How would you say that your style is your own, or what makes your style, you know, the Iron Lady?

Well, I would say as I've grown, and I've been— I'm 43, and I've been basically doing this since I graduated from college. When I was younger, I tried to emulate the older advisors, and I think you could see that I wasn't as natural. And as I got more confident with who I am and how I help clients, I really just— this is who I am, and there's no mystique. And I also, I'm married to someone in tech, and we have two young kids. So I think a lot of the struggles of the clients are the same as mine, like two working parents and figuring out the kids and check stocks. And then I'm the investment professional making those. So I think my clients really understand me because we're going through the same things.

Do you have any advice for an advisor that's just starting out?

A lot of advice. First, I am so fortunate. I have the greatest team. And finding the right people to work with who have the same values as you, complementary skills, but also I enjoy my partners so much. And so I feel very lucky because you spend a lot of time with them, but you also want to grow together. So finding the right team. And then secondly, I would say having a focus because that is how I found success bringing in business is I have those tech executives. I have the divorcees. And I found because I've seen so many of the same situations, I can say, oh, I know how to— not everything is slightly different, but here's an array of options for you.

Pattern recognition. Exactly.

Yeah.

You get to understand its reps and basically you also build up a brand in that sort of area as well. I think that's a really great piece piece of advice for folks. You can't be everything to everyone, but you can be everything to a certain group. Exactly. Thank you so much for coming into the studio. I really appreciate your time here.

Thanks for having me.

The production team for Barron's Advisor: The Way Forward Next Generation is Ellie Ismailidou, Rebecca Bisdale, Paul LeBlanc, and Alexis Moore. Jenna Mathis is the director of programming for Barron's Advisor programs. Greg Bertollis is the editor-in-chief of Barron's Wealth and Asset Management Group. Allison Tucci is a freelance host for Barron's Advisor and SVP at AssetMarkt. We'll see you next time.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.