NEW YORK (Dow Jones)--One of the biggest problems financial advisers face is elderly investors with shrinking portfolios. Sometimes the solution lies with their children - and that presents its own challenges.

Adviser Jeff Fishman has an example: A client in her mid-80s came to him about half a dozen years ago and is now at risk of running out of money.

Fishman, of investment advisory firm JSF Financial in Los Angeles, says the client's monthly expenses - notably her rent, health insurance and prescription drugs - have increased. They're threatening to outstrip her income, which comes from Social Security and individual retirement account distributions.

Fishman suggested a meeting with her son. The client agreed but was resistant to some of the changes they discussed, such as exploring less expensive housing options. Though they didn't solve her problem, Fishman feels better that the son is aware of it.

It's often difficult for individuals to absorb dire news on their own and take action, Fishman notes. Older clients may be protective of their independence and many are reluctant to make their troubles someone else's, even if that other person is a close relative.

An adviser has to respect a client's privacy and can encourage - but not force - him or her to include family members in the conversation. Fishman sometimes asks clients for permission to contact a family member. In situations where he has an existing relationship with a client's adult child, Fishman might mention his concerns directly.

"It's a balancing act," Fishman says. "Is it clear-cut? No."

Certified financial planner Susan Elser, of Indianapolis, Ind., has seen the situation in reverse.

Some of her clients, worried about seeming nosy or greedy, have asked her to check in with their parents to confirm they're on solid financial footing.

Clients pay Elser's hourly fee and let their parents know she'll call them to schedule a meeting. Elser says she visits parents in their homes, where they're more likely to be comfortable and where their documents are likely located.

In these meetings, Elser introduces herself as someone whose job is to help people get their finances in order. She asks about matters including estate planning documents, life insurance policies and health care directives.

Sometimes, she digs deeper. One client feared his nearly 80-year old father was running out of money. The father agreed to meet and Elser discovered he had an equity-heavy investment portfolio that had been walloped by the market downturn.

To ensure his money would last, Elser recommended an annuity - something she rarely does as a fee-only planner. She also encouraged the father to speak with his son, and to share investment documents with him. The son would want to know his father will be financially secure, she explained.

Another client was concerned that herparents couldn't afford a planned move to a retirement community. Elser reviewed the couple's situation and concluded that, yes, they could indeed afford it.

Elser says preserving parents' privacy while reassuring her clients is a balancing act. She encourages parents to discuss their meeting with their children and to let them know where to find the parents' account information and estate planning documents in case of emergency.

(Kristen McNamara writes Practice Management, a column that looks at ways financial advisers can build and improve their business. She can be reached at 212-416-2238 or by email at kristen.mcnamara@dowjones.com.)

(TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.) [ 07-17-09 0927ET ]

(In "=PRACTICE MANAGEMENT: Cutting Costs - Just Not The Pool Guy," published at 9:47 a.m. EDT, Fishman's name was incorrect in the sixth paragraph. The correct version follows.)

By Kristen McNamara

A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)--For Jeffrey Fishman's clients, cost-cutting stops at the pool house door.

Like financial advisers across the U.S., Fishman, of investment advisory firm JSF Financial in Los Angeles, is spending more time on budgets and cash flow with clients who are bringing home less money in these challenging times.

Many of Fishman's clients work in the entertainment industry. A writer or executive producer whose income falls to $300,000 from $500,000 because networks are ordering fewer sitcom episodes might not be the neediest of cases. But if her fixed expenses are $400,000, she's in trouble.

"It's like wage deflation," Fishman says. "People are making less money doing the same jobs they've always done."

Vacations, restaurants and country clubs are getting the ax. The gardener and pool guy often stay, however. Fishman knows clients won't do this work themselves and the monthly fee of, say, $100 for pool maintenance doesn't have much effect on the bottom line.

Private school, which can cost from $10,000 to $25,000 a year, is another matter. If clients believe their income shortfall is temporary and if they can dip into - but not wipe out - their cash reserves, keeping a child in private school for the remainder of the school year can make sense. Switching schools is a huge change for children, and Fishman doesn't want clients to make big decisions in a panic.

But if clients don't have adequate savings, their cash flow situation isn't likely to improve and a new school year is approaching, a change may be necessary.

Fishman's firm earlier this year began actively focusing on investors in transition, such as the recently unemployed, widowed or retired. He says client demand has been strong.

Furloughs, bonus cuts and reduced benefits are hitting employees of all stripes. With the unemployment rate topping 9%, many workers are grateful to have a job and are looking for guidance on making do with less.

For financial advisers who analyze such clients' expenses, emergency reserves are a top priority.

Everyone should have access to funds - preferably cash - to cover at least six months of living expenses, says Francine Duke, a certified financial planner with Aqua Financial Planning in Vernon Hills, Ill. If a family has just one source of income, she recommends nine months of coverage.

If a salary cut could foreshadow a job loss, Duke says workers should take precautions while they're still employed. She suggests calling a credit card company to request a lower interest rate, even if the client isn't carrying a balance, to ease the pain of having to rely on credit in an emergency. Refinancing a home or obtaining a home equity line of credit, meanwhile, may only be available to the employed.

The hospital that employs one of William Muller's clients recently slashed raises and reduced its medical benefits contributions.

Muller, a certified financial planner with Common Cents Planning Inc. in Glen Mills, Pa., rebalanced the client's portfolio recently and increased her cash reserves to give her peace of mind about meeting short-term expenses. The client intends to use some of that money for necessary home repairs she can't put off any longer, including a new roof.

Marc Schindler, a certified financial planner with Pivot Point Advisors in Bellaire, Texas, scours the itemized expense list he requires of his financial planning clients.

He focuses first on large items - encouraging clients to drive their cars for a few more years instead of buying new ones, for example. Then he digs deeper - have they talked to their insurance agent about bundling their auto, homeowners and liability policies for a lower combined rate?

Advisers say most clients are open to their suggestions.

"I think people are willing to make sacrifices if they know it will keep them from getting into serious trouble later," says Duke.

(Kristen McNamara writes Practice Management, a column that looks at ways financial advisers can build and improve their business. She can be reached at 212-416-2238 or by email at kristen.mcnamara@dowjones.com.)

(TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.) [ 06-26-09 1042ET ]