What Are Crisis Events in Financial Planning?

Crisis events are significant, often unexpected life occurrences that fundamentally disrupt a client's normal functioning and create urgent financial planning needs. Unlike routine financial decisions, crisis events occur under conditions of extreme emotional stress, time pressure, and uncertainty. The CFP Board recognizes that these situations require a distinctly different approach from standard financial planning---one that prioritizes emotional support and measured response over immediate action.

A 2025 study published in the Journal of Financial Planning surveyed 172 financial planners to identify the most common client crises they encounter. The research found that the most frequent client crises involve loss (death of a loved one) and divorce, with practitioners reporting significant gaps in their training for managing grief and crisis-related events.

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Types of Crisis Events

Crisis events fall into seven major categories, each presenting unique challenges for both clients and planners:

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How Grief and Trauma Affect Decision-Making Capacity

Understanding the neuroscience of crisis is essential for CFP professionals. When clients experience traumatic events, their brains shift into survival mode, activating the amygdala (the brain's fear center) while reducing activity in the prefrontal cortex (responsible for rational decision-making). This biological response has profound implications for financial planning:

Cognitive Impairments During Crisis:

• Reduced working memory: Clients struggle to hold multiple pieces of information simultaneously
• Impaired future orientation: Difficulty thinking beyond immediate needs
• Tunnel vision: Focus narrows to perceived threats, missing important considerations
• Decision fatigue: Even small decisions become exhausting
• Foggy thinking: What some call "grief brain" or "widow fog" where concentration is severely impaired

Emotional Impacts on Financial Behavior:

• Risk perception distortion: May become either excessively risk-averse or recklessly risk-seeking
• Susceptibility to manipulation: Heightened vulnerability to scams and poor advice
• Regret aversion: Fear of making any decision that could be "wrong"
• Present bias intensification: Overwhelming focus on immediate relief over long-term welfare

Research on widows specifically has found that advice given to new widows often "goes in one ear and out the other" because grief impairs the ability to process and retain new information.

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The Role of the Planner During Client Crisis

The CFP professional's role fundamentally shifts during client crises. Rather than serving as a technical expert driving toward optimal solutions, the planner becomes a supportive guide who:

Provides Emotional Containment:

• Creates a safe space for clients to express fears and concerns
• Validates emotional responses without rushing to "fix" things
• Offers reassurance that the planner will help them through the process
• Maintains calm and stability when the client cannot

Acts as a Decision-Making Buffer:

• Protects clients from making irreversible decisions during acute distress
• Identifies which decisions are truly urgent versus those that can wait
• Provides information in small, digestible portions
• Repeats and documents key information knowing retention is impaired

Coordinates with Other Professionals:

• Connects clients with attorneys, accountants, therapists as needed
• Facilitates communication between team members
• Serves as the client's advocate when they cannot advocate for themselves

Maintains Appropriate Boundaries:

• Recognizes limits of financial planning expertise
• Refers to mental health professionals when appropriate
• Avoids becoming the client's sole source of emotional support

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Clients Need Support, NOT Immediate Action Plans

This principle is so critical that it bears emphasis: during acute crisis, clients need emotional support first. The instinct of many financially-trained professionals is to immediately create action plans and solve problems. However, premature action during crisis often leads to:

• Decisions that are later regretted
• Missed opportunities because important information was overlooked
• Client feeling unheard and rushing through the grieving process
• Damage to the client-planner relationship

What Support Looks Like:

• Listening without immediately offering solutions
• Acknowledging the difficulty of the situation
• Reassuring clients that important decisions can wait
• Handling only truly urgent matters (stopping automatic payments to deceased, securing immediate cash flow)
• Checking in regularly without pushing for action

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When to Advise Delay of Major Financial Decisions

CFP professionals should counsel clients to delay major financial decisions during crisis, particularly decisions that are:

Irreversible:

• Selling the family home
• Lump-sum distributions from retirement accounts
• Giving away large sums to family or charity
• Major purchases (new home, car, business)

Identity-Defining:

• Career changes
• Relocating to a new city
• Remarriage and financial integration
• Major lifestyle changes

Complex with Long-Term Implications:

• Investment strategy overhauls
• Estate plan revisions
• Business decisions
• Long-term care commitments

The general guidance---often called the "one-year rule" for widowhood---suggests waiting at least 12 months before making major irreversible decisions. However, this timeline varies based on the individual, the nature of the crisis, and the specific decision at hand.

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Building Crisis Response Protocols

Proactive CFP professionals develop crisis response protocols before crises occur. These protocols enable faster, more effective response when clients need help most:

Pre-Crisis Preparation:

• Maintain current client contact information including emergency contacts
• Document client preferences for communication during difficult times
• Know which family members are authorized to discuss finances
• Keep copies of essential documents accessible
• Establish relationships with referral resources (attorneys, therapists, etc.)

During-Crisis Protocol:

• Designated staff member for initial crisis contact
• Checklist of immediate actions by crisis type
• Template communications for common situations
• Clear escalation procedures
• Documentation requirements for compliance

Post-Crisis Follow-Up:

• Scheduled check-in timeline
• Review of decisions made during crisis
• Assessment of ongoing needs
• Transition back to normal planning relationship

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Overview of Crisis Types and Planner Response

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CFP Exam Considerations

For the CFP examination, remember these key principles:

1. Crisis requires a different planning approach than routine situations
2. Emotional support precedes financial action in acute crisis
3. Decision-making capacity is impaired by grief and trauma
4. The planner's role shifts from expert advisor to supportive guide
5. Major decisions should be delayed when possible during acute crisis
6. Preparation and protocols improve crisis response
7. Referral to other professionals (mental health, legal) is often appropriate

Understanding crisis events is not just about knowing what financial steps to take---it is fundamentally about understanding human psychology under stress and adapting the planning process accordingly.