Declaring bankruptcy as a financial professional

When the average Mississippian declares bankruptcy, most people nowadays are likely to find the financial challenges understandable. After all, state residents are still coping with a challenging economy that has included unemployment, foreclosures, student loans and rising prices of food and gas. Still, there are some people in certain professions whose personal bankruptcy can alter their professional reputation.

One such occupation, of course, is financial advising. People expect their financial advisers to be adept at money management and to exercise sound judgment with both their personal and professional finances. Still, the nature of bankruptcy is that it is a solution to an unmanageable debt problem, and, sadly, this problem can cut across all occupations.

Bankruptcy happens to entrepreneurs, private sector workers, public employees, high-income earners, independent contractors and low-wage earners. It can happen to a millionaire or a minimum wage employee. It has happened to actors, moguls, politicians and many individuals' friends or family members. Last year, there were over one million bankruptcies in the U.S. categorized as "nonbusiness."

Still, because financial advisers are entrusted with other people's funds, they are often held to a higher standard. Nonetheless, unexpected life changes, such as a sharp decrease in pay or an adult child who has to move back home can thwart any person's financial plan. If one's plan veers off-course to the point of bankruptcy, that person need not necessarily abandon their profession.

Financial advisers, and others who work in financial services, can be open and honest with their clients about past mistakes. After all, sometimes it takes erring on one's own to fully understand the lessons later taught to others. It can also be an opportunity to educate others on bankruptcy as a tool to make better financial decisions. After all, filing for bankruptcy can often stop foreclosure or stop repossession, two things that can immediately give a person increased control over their financial life. By being candid and humble about their experiences, professionals can demonstrate the power of financial self-improvement, either via bankruptcy or other means.

Source: Investment News, "Bankruptcy's lessons for advisers," June 8, 2014

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