Extending the Definition

When viewing your clients’ plans, do you include helping them manage their careers? Michael Haubrich thinks you should. When developing a comprehensive financial plan for clients, he argues that planners should expand their definition of asset classes to include a client’s career as a “new and vital element in the data gathering, analysis, and development phases of traditional financial planning.”

Haubrich, a CFP with Financial Service Group in Racine, Wisconsin, has dubbed his novel approach Career Asset Management (CAM), and says that like traditional asset classes of stocks, bonds, cash, and real estate, the career asset class provides planners with an opportunity to add value by increasing clients’ potential income and building with them a better balance between their work and the quality of their lives.

When talking to clients about retirement, Haubrich noticed that many voiced a desire to retire early and quit their careers completely. After probing, he says, most clients admitted they wanted to retire early so they could get out of failing careers. So by focusing on a client’s career and improving his satisfaction with it, “then we’re in a position to get them off of that paradigm of taking retirement early–to extend [retirement] by another five years,” he says.

Haubrich offers this example: A client with peak annual income of $150,000 abruptly retires at age 60 instead of extending the career asset for an additional eight years–first three years at 75% work time (and income), the next three years at 60%, and last two at 40%. Assuming an average income and employment tax rate of 40% and a 6% discount rate, the net present value of that increased income stream is $348,150. He notes that the example only accounts for income, and doesn’t include “other quantifiable measures of the value of the career asset” including employee benefits, increased value of a pension plan, and Social Security benefit accruals.

Many clients make the mistake of just wanting to get out of their careers, Haubrich says, so if planners can “catch them earlier and treat [the problem] more holistically, we’re in a position to add tremendous value–before they go to the extreme of just getting out.”

Finding Common Cause with Career Coaches

To help in this endeavor, Haubrich collaborates with career coaches and counselors in much the way planners deal with estate planning attorneys and accountants. He says career development professionals are itching to partner with financial planners because they see fear of finances as “the main roadblock to their clients really taking aggressive steps in optimizing their career,” and that “financial planners can work with their clients to make sure their money is in line with the transitions that they need to make with their careers.”

Plus, he says, planners can get a steady stream of referrals from career counselors and coaches just as they would from estate planning attorneys or other professionals. “If planners would just include career asset management in their dialogue [with clients], they’ll discover that this is not only a great value add, but a tremendous business development opportunity.”

In the last year alone, Haubrich says he has added about 12 new clients from referrals he’s received from career coaches. Haubrich charges an extra $1,000 to $1,500 for a comprehensive financial plan that includes career asset management. If a client wants a standalone career makeover, he charges about $3,000, he says, because it includes going through the same planning steps. A career makeover “doesn’t include risk management and estate planning, but you certainly are involved with asset management and asset allocation because if a person is doing a career transition, they need to reposition their assets to support that transition.”

Helping Older Clients, Attracting Younger Ones

Haubrich recalls a referral he got from a career coach. Janet was in her mid-50s and worked as a middle manager in IT for a Fortune 500 company. “She came in and insisted on the old retirement model [of retiring early] and wanted us to figure out whether she could afford to get out of there in the next 18 months, saying she’d figure out then what she wanted to do,” Haubrich recalls. “We crafted a plan, and six months later she called and her personal life was in turmoil–they’d cut a couple more of her reports and she was stressed,” he says. “I met with her and told her the return on life just wasn’t there, and we’re going to figure out a way to rearrange your finances and you’re going to get out now.”