From the March 2008 issue of Investment Advisor • Subscribe!

The Age of Enlightenment

Long-lived but short-sighted, optimistic but anxious, self-centered but altruistic, baby boomers badly need your help

"Am I set for retirement?" the baby boomer client asked his financial advisor in their first meeting. "I've been writing checks for $3,000 a month ever since my CPA told me to."

After making out these checks, however, the client had simply been putting them on his dresser. "My CPA calls me up and yells at me because I don't send them in," he confessed sheepishly. "But I have a cash business. What if we run short?"

Instead of scolding him for this behavior, the advisor asked a simple question: "What does retirement mean to you?"

"Nobody has ever asked me that," the client mused. "I guess you go sit on a beach somewhere, and then you die." After a pause to consider this, he said in amazement, "No wonder I'm not sending in the checks."

To help this client let go of the notion that retirement meant death (no wonder so many boomers hate the word!), the advisor told him, "Retirement could mean doing what you want, when you want, with whom you want."

Reframing the concept set the client free. Soon he was contributing $20,000 a month to his retirement accounts. "I thought I didn't want to retire," he told his advisor. "Now I can't get there fast enough."

This fortunate baby boomer--a client of Rick Kahler, president of Kahler Financial Group in Rapid City, South Dakota, who told me the story--recently retired, having quadrupled his retirement nest egg since that meeting.

Advisors who, like Kahler, succeed in helping clients come to grips with the future typically use a process similar to one I've advocated for years. The first rule is not to impose your own agenda; find out why clients are coming to you. Then take time to help them plumb their innermost longings so you understand the deeper needs and desires to be built on. Listen attentively, and mirror their fears and concerns as compassionately as you can. Clarify their goals and dreams in specific terms. Finally, use all your expertise and resources to brainstorm ways to help them meet as many of those goals and wishes as possible.

That's how it should work. But the baby boom generation brings a unique mindset to the table (see "The Bell Tolls" in the February 2008 issue of IA). For instance, boomers feel "entitled with higher expectations of pleasure than any previous generation has known," as Diane Miller, a principal of Miller Financial Planning in West Somerville, Massachusetts, told me; yet they are also "giving and sensitive to the poor. An interesting dichotomy." These apparent contradictions help explain why it can take special sensitivity to help them handle their financial issues.

More then Money

"Retirement is about money and it's about more than money," says Helen Dennis, a specialist on "aging workforce" issues and co-author of Project Renewment: The First Retirement Model for Career Women (Scribner, 2008). "People are often pursuing what's most meaningful for them. Some have a religious calling; others a calling to build houses for humanity; others want to influence the political horizon. Retirees today have more opportunities than at any other time in history."

Given these possibilities, it may not take a fortune for some boomers to be happy. In fact, Kahler often reminds clients about a 2005 survey conducted by Time magazine which found that above the $50,000 annual income level there is no correlation between people's income and their degree of happiness.

Annual retirement income of $50,000 (or $55,000, adjusting for inflation) may be fine for clients who have a modest lifestyle. However, all too many boomers are accustomed to living large.

"Many boomers are living hand to mouth," Kahler says. "They don't have any money, which makes it hard for the average planner. We typically don't have the tools [or often the training, I might add] to help somebody who knows he ought to be saving but can't save."

But change is possible. Kahler cites the example of a boomer couple in their late 50s who were earning $350,000 a year but spending $400,000. At the outset, he says, they couldn't even talk to each other about money. It took him a year, working in tandem with therapist and life coach Laura Longville, to help them break this vicious cycle.

"At our last meeting, they were amazed at the progress they made," he says. "They'll be maxing out their retirement plan soon, which means they can retire with $65,000 a year. They'll still have to make some significant changes, but their future before this was living on Social Security. We've more than doubled their retirement income."

Teaching Gratification Deferral

How can you inform boomer clients that if they hope to live comfortably in the future, they'll need to earn more or spend dramatically less? Many boomers aren't used to being told that they can't get what they want, the way they want it. They're likely to react with passive resistance, outright rebellion, panic, or shame.

To help them recognize and embrace the value of deferring gratification, I would encourage you to coach them on one of my core concepts: that superficially indulging ourselves makes it impossible to nourish our souls. You might begin a discussion by asking what one change your clients could make to begin treating themselves better on a deeper level.

If they're open to curbing their consumption, there are several tactics you can recommend. I'm sure you're familiar with the spending diary as a way to uncover areas of overspending. To make this tool more useful, ask clients to write down not just what they spend but how it made them feel, and see if it reveals anything about their choices, motivations, and new possibilities for saving.

Reviewing temptations to spend may also help. Do friends or neighbors push them to live beyond their means? Are there particular stores or restaurants where they tend to overexercise their credit cards? To the extent that they can avoid what I call "slippery places," they may be able to rein in their spending without feeling too deprived.

Spenders who need outside help may benefit from the support of a more frugal friend who would be willing to act as a money mentor or spending coach. If you recommend Debtors Anonymous, don't be surprised to hear a quick "no," no matter how solid your rapport with the client. Some people are too ashamed to admit that they may be damaged in this way. You may have to think of other solutions, such as a financial recovery counselor. (Karen McCall and her associates at www.financialrecovery.com and Bari Tessler's group at www.consciousbookkeeping.com are two valuable resources.)

Two more tips: Once you've developed guidelines for an overspending client, take care not to call it a budget--a word that free-living boomers mentally translate as "ball and chain." Refer to it instead as a spending plan, or a spending, saving, and investing plan, or even a financial growth plan.

Perhaps it should go without saying, but be sure the targets you set for overspending boomers are realizable. As I mentioned in the first article in this two-part series (February 2008), a client who has saved little or nothing can be thrown into hopeless despair by the news that he needs to amass millions of dollars for retirement.

Shame on You

The worst strategy, I believe, is to blame clients for their inadequate savings or their excessive spending. Making people feel ashamed usually doesn't motivate them to change. On the contrary, they tend to lock into self-reproach, flagellating themselves over and over instead of moving forward.

Ted Klontz, PhD, who specializes in coaching professionals and clients in the process of change, is bothered by "articles I read about how the majority of boomers have acted irresponsibly....[It's] a good example of taking a complex situation and making a simple solution."

Klontz, president of Onsite Workshops in Cumberland Furnace, Tennessee, suggests that boomers face new rules and shouldn't be blamed for operating under the old ones. He points out that when boomers started their professional careers, statistics suggested they would live only a few years in retirement. As average life expectancy has increased, so has the cost of health care--an annual retirement expense of tens of thousands of dollars that no one accurately predicted. Also, company-paid pensions were the mainstay of retirement planning when boomers began working. That secure income has largely gone by the boards, replaced by the risk of do-it-yourself investing. Finally, Social Security, once a reliable part of the "golden years," has been unveiled as a Ponzi scheme that threatens to implode.

To suggest that baby boomers should have anticipated and planned for all of this seems pretty simplistic, Klontz concludes. He feels it's more fair to say that boomers were blindsided by all this change in their later working years, and are now blamed for being stupid about it.

I wholeheartedly agree with Klontz's view. If you approach your boomer clients without criticizing them for what they did or didn't do, but instead use empathy and compassionate listening, you'll find it much easier to get them on board with you.

Breaking Through Denial

Even though these "new rules" have received ample media coverage in recent years, many boomers still haven't stepped up to the plate. They may unconsciously think, "Something will come along to bail me out" or "I'll just keep working if I have to." These are examples of what Catherine Fitzgerald, PhD, of Fitzgerald Consulting in Bethesda, Maryland, calls "the weird optimism/anxiety, kind of magical thinking that we boomers tend to have."

How can you overcome this "magical thinking" to help boomer clients prepare for retirement's harsh realities? The professionals I queried use different approaches.

Larry Moskat, a former psychotherapist turned financial planner in Scottsdale, Arizona, takes a firm stance in overcoming denial: "I let [clients] know the situation is serious, but that we will explore any and all avenues in search of the best-case scenario outcome," he wrote me. "In the presence of further 'denial,' I may tell them that if they truly want help, they are going to have to decide to either go it alone, or align with a financial professional where they believe in the advisor's ability and integrity and feel a good 'chemistry.' Then I try to just shut up."

Daniel Wishnatsky, a financial planner who owns Special Kids Financial in Phoenix, points out that there may be something other than denial behind a client's resistance. "It may be that the client has already decided, for whatever reason, that they are not willing to make the necessary changes or that there are issues they simply don't want to share with you," he suggests. "Having come to that conclusion, it is easier for them to appear to be in denial than to try and defend a decision that appears inexplicable."

He adds that people who feel on the defensive will often say what they think makes the best defense, not what they're actually thinking. "Often the best tactic is to go in an entirely different direction, talk about sports or a hobby or whatever, and give them time to drop their defenses," he says. "It is absolutely crucial that you listen closely with an open mind. Because more often than not, they will start to drop subtle or not-so-subtle hints as to the real reason for their reluctance to plan. If you tune into that and nurture it a bit, without overdoing it, you may be on your way to a more productive dialogue."

Get Closer by Backing Off

Planner Wishnatsky cautions not to expect too much right away. "The goal is to get you both sitting on the same side of the table. From there the rest is relatively easy." This is a great reminder that sometimes you need to back off from a client's resistance, waiting for an opportunity to move forward and "dance with" the resistance until you can touch the client's mind and heart.

Jim Ludwick, a planner with MainStreet Financial Planning in Odenton, Maryland, invites clients who are in denial to describe three scenarios: what happens if all their dreams come true; what happens if outcomes are just so-so; and what happens if they've made mistakes that force them to change their lifestyle. With each scenario, he asks, "What will your life be like? How will you feel? What will your friends and relatives say about you?" I suspect that when you get to scenario No. 3, this last question may unleash shame, regret, and a fair amount of pent-up feelings, requiring you to listen with extra patience and compassion.

"Hopefully the planning process gently stirs an awakening to reality," says Keith Newcomb, a financial planner and wealth manager with Full Life Financial in Nashville. "It's a delicate matter to help such a client understand the reality of what their situation requires, and to guide them through a process that leads them to reconcile their plans with reality."

In Ted Klontz's view, most, if not all, clients come to the table with significant shame around money, believing they have either too much or not enough. It's important to recognize that they're ambivalent to some degree about changing their financial behavior, he says; otherwise they would have already changed. That's why the planning process often bogs down in the face of client resistance.

"It is very clear what works and what doesn't" in overcoming this resistance, Klontz says. "Lecturing, providing more information and delivering more facts, threatening to 'fire' clients, cajoling, telling stories of how you can relate, asking questions, confronting, and all the other usual tools that seem intuitively correct are guaranteed to actually increase resistance and thicken denial." He draws a parallel with open-heart surgery survivors, only 10% of whom follow doctors' orders to change their heart-destructive life styles. "And planners are just dealing with finances, not life and death!" he adds.

To achieve better outcomes, Klontz teaches the technique of exquisite listening, which enhances a professional's ability to help clients clarify everything they are trying to say. It's a skill that his research has shown to be highly effective. "Typically, professionals miss much of what is being communicated because they stop listening too soon," he notes.

My experience suggests that there are a number of techniques for overcoming denial, each with its own advantages. I believe the most important, as Klontz and other empowering advisors confirm, is attentive, patient, and empathetic listening.

Changing Boomers' Attitudes

In mulling over ways to convert boomer clients' denial into greater openness and self-awareness, I'm reminded of the six stages of successful self-change, as described by professor of psychology James Prochaska, PhD (see "Change of Heart" in May 2005 IA). The first stage--denial of a problem--is what Prochaska calls precontemplation. I like the implication that there is a continuum between precontemplation and contemplation that we move along when we are ready to take a problem seriously. From there, we progress to preparation (getting ready to act) and then to action--the "busiest" phase of change. This framework helps me view denial as simply an early step on the path to taking action.

Holly Hunter, a planner and principal of Hunter Advisor in Portsmouth, New Hampshire, finds Prochaska's thinking very valuable. "As advisors we must be with the client as they move through the stages, changing 'for good' as in the case of overspending," she says. "Bribes and incentives are not likely to produce the desired long-term behavior modification that will be beneficial for the client. Having raised five children, I can attest to that."

Gayle Knight Colman, a financial advisor and wealth coach at Colman Knight Advisory Group in Carlisle, Massachusetts, sums it all up with her belief that an advisor's full-bodied presence, rather than specific techniques or tactics, makes the difference in helping clients overcome denial. "My short answer is to meet them where they are, in thought, space, and consciousness," she says. "At some core level, people know the truth about their overspending or lack of planning. At the same core level these people want to access that truth, which ultimately opens the door to freedom and making conscious choices. So I would not say I pierce the veil of denial, but I walk with my clients and allow them to unfold the truth with support, truth-telling, and inviting them to a whole new way of being and playing in the world."

The Compleat Boomer Advisor

William Sadler, PhD, has been one of the leading prophets of the new retirement for many years. Now in his 70s, he is an active speaker and author--most recently of Changing Course: Navigating Life after 50 with James Krefft (Center for Third Age Leadership Press, 2008)--dedicated to helping boomers fashion their Third Age with greater consciousness and vitality. When I spoke to him recently, he suggested that boomers need to embrace the following guidelines to design what he calls a "life portfolio":

(1) "Dig deep and do mindful reflection." Advisors can help clients in this part of the process by asking the right questions about what they really want, what moves and inspires them, what gives their life meaning.

(2) "Develop realistic optimism." Clients rely on you for a realistic assessment of their situation. But no matter how unpromising it appears to be, you can encourage optimism by coaching them to build on their strengths and passions, manage their worries, and learn new skills to make their retirement years more rewarding.

(3) "Develop a positive Third Age identity." Sadler characterizes the Second Age (one's working years) as a quest for achievement, while in the Third Age the focus shifts to fulfillment. To assist boomer clients in the transition to a "Third Age identity," you can help them identify what used to motivate them, and explore new sources of inspiration that will guide them toward growing fulfillment.

(4) "Redefine work and play." Sadler feels that in the Third Age, work may become more important for boomers, not less. Whether your clients want to keep working for love or money, or yearn to fully retire and relax, you can help them determine a productive and satisfying course of action.

(5) "Expand freedom and build deep personal relationships." I believe you can have an important impact here when you help clients explore what more freedom would mean to them, and strategize ways to achieve it. You can also make it easier to develop new communities of support by steering them toward networks of people who share their interests.

(6) "Create a more caring life." This means not just caring for family, friends, or worthy causes, according to Sadler, but also caring more deeply for oneself. You may want to become more of an advocate for your clients in this regard, encouraging them to find a variety of ways to manage stress well and stay connected to others.

This may seem a far cry from efficient portfolio theory or reading a balance sheet, but I believe that the more successfully you help boomer clients segue into their Third Age, the stronger your relationship with them will become. If you feel that you yourself need support in any of these areas, you might consider collaborating with a life coach or therapy professional.

Don't Just React--Act!

To capitalize on the tremendous need boomers have for your services, and help them get past their resistance or denial, I urge you to reach out to them. Sponsor workshops and forums on important subjects such as the aging brain, managing the stresses of later life, nutrition and health, long-term care, new housing options, new avenues for fulfilling work, or volunteering choices. Topics like these can help boomers associate you with a holistic kind of life planning, making it easier for them to consult you in a climate of trust and openness (and shorten the time until you can inspire them to act).

If they have overly optimistic dreams of how much money they'll have when they retire, you'll need to be prepared for creative thinking about how to do more with less. As time goes on, I predict that you'll find yourself continually adding to your list of resources. New partnerships and new possibilities will emerge as more clients enter their Third Age and eventually their Fourth (the age of legacy, of passing the torch).

But now, as boomers flood into their 60s with the potential of a third of their life still ahead of them, they are at a turning point. They have a chance to move from achievement to fulfillment, to relax and savor long-deferred opportunities, to stimulate mind and body in new ways, to clarify their legacy, and to create a different life rich in meaning, pleasure, and purpose.

Money is merely a tool that facilitates this process. What your boomer clients need most is your wisdom and self-awareness, which can give them the confidence to believe that despite some unavoidable losses, the best is yet to come.


Olivia Mellan, a speaker, coach, and business consultant, is the author with Sherry Christie of The Advisor's Guide to Money Psychology, available through the Investment Advisor Bookstore at www.investmentadvisor.com. She also offers money psychology teleclasses for financial advisors and for the general public. E-mail Olivia at moneyharmony@cs.com.

Reprints Discuss this story
This is where the comments go.