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How to Deal With Clients’ Not-So-Great Retirement Expectations

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My, how the conversations have changed. It seems that 10 years ago many of the conversations I had with clients and prospects revolved around accomplishing their retirement dreams: playing plenty of golf, having time with the grandkids, travelling all over the world. The markets were cooperating, clients were still a number of years from seriously considering retirement and they were filled with great expectations of being able to reap the rewards of moving onto the next stage of life.

Now these same individuals are closing in on a retirement date, and those lofty retirement dreams, for many, seem unattainable. Many are now looking to work longer, take fewer trips and hope to just not run out of money. The tenor of the conversation has changed dramatically.

The question is, as professionals, what do we say to our clients who feel like they will never be able to retire in the fashion they once dreamed of?

Clearly, not all of our clients fit this description. Each of us has the “AA” client with several million dollars for whom pursuing their retirement dreams may not be an issue. But even for some of them, thoughts creep in that indicate they have concerns.

I have the privilege of sitting on the Curian Executive Advisory Council. We meet semi-annually to hash out topics that are of interest to the dozen or so top advisors who attend. At a recent meeting, one of those topics revolved around what to tell clients whose retirement plans indicate they will not be able to reach their goals. The topic was hotly debated, and the underlying message was that this was happening in all of our offices, often, and that the discussions were not always happy ones.

So from my perspective, I offer some practice management ideas on how to deal with this difficult issue.

First, the focus of the retirement discussion has to be broader than just the money. Yes, the engine that fuels the retirement plan is cash flow, and investment returns are needed generally in order to accomplish this. We have those fortunate clients who need little income from their nest egg, but the majority of my clients still need to complement their fixed income sources. However, we have no control over returns, particularly the timing of those returns. Those who retired in the ‘80s and early ‘90s had a different experience from those who retired in the past 10 years. Timing is everything. We have no control over this in the planning process.

Instead, focus on what you and your clients can control. I spend a significant amount of time with my clients in their reviews talking about all of the areas they can control. Financially, we make sure they have completed all estate planning and beneficiary forms. We help them visualize success by working with them on bucket lists. Physically, we have created forums to help them get better informed as to how to stay healthy. Emotionally, we have brought resources to them to help them understand the journey they are on and to try to give them tools to be the best they can be.

One of the “deliverables” we provide our clients is a Financial Organizer System. Studies indicate that our clients, no matter how much money they have, feel disorganized and out of control when it comes to knowing what they own and where it is. The feedback we receive from our clients is that the organizer system is one of the best things we do for them. It helps them feel much more in control. Create your own or buy one already built. It’s a big piece of what we can do to make our clients feel better about their journey.

Second, we have clients who just have not accumulated enough to retire. What do you tell them?

I have a dear client who is now 65. Her husband had passed away 12 years ago. At the age of 60, she was being let go from her job of 30 years, and she was beginning to lose her sight. Her world had come undone. She had $500,000 of assets, which was not enough to support the life she was hoping to create. How do I do my job of providing honest advice to her and still help her transition into the next stage of life?

I spent several hours with her to get an understanding of what she needed in order to get some sense of emotional and physical stability back in her life. Her big goal was not to rent any more. To her, owning something would help her set some new roots, but the numbers did not support this goal. We worked on developing a plan that was to evolve in stages. We agreed that she could buy a condo now, but would probably have to sell it in seven to 10 years. We came up with a plan that was not the one of her dreams, but was a nice compromise and allowed her to move forward.

Work with your clients to help them understand their different choices and come up with a plan that will get them somewhere, one step at a time. We really don’t know what lies ahead, how long we have or how healthy we will be, so be creative and help your clients get as much joy out of the journey as they can.

Finally, a little twist: How do you deal with clients who can achieve their retirement dreams but don’t believe the numbers? Their retirement plan indicates they are all set, yet they still have more than the normal amount of trepidation about their financial future.

I tell my clients all the time that I am 50% psychiatrist and 50% financial planner because we do have to deal with the emotions as much as, if not more than, the pure numbers.

One approach is to get to the root of the problem. This is not easy, but it can be very rewarding for you and your clients. Prompt them to tell you what it was like growing up and how they truly feel about money. For some, no matter how much money they have, their core values tell them they really are not worth that much. This is the psychiatrist angle, and it often does pay dividends if you listen well. It could be that no matter what the numbers indicate, they will never feel comfortable. That is fine if you mutually recognize this. It will help to frame many of the conversations you have with them and how you deal with them in the future.

Another approach is to deal head on with the experience we all have had with the market’s total return over the past 14 years. I faced this with a client of mine in a recent review. He has accumulated $3.7 million in investable assets, and his retirement roadmap indicated his retirement would be successful even if we assumed only a 5% return on his assets for the next 30 years. I have no control over returns, but I am comfortable that there is a good probability we could achieve that over the very long term. However, all he sees is the flat performance and does not believe that will ever change.

Here it is instructive to bring perspective to the clients. First, share with them your knowledge of how markets perform and the cycles we go through. Second, remind them this is why they hired you. We meet with our clients regularly to change assumptions and goals; if updating is necessary, it will be done. Prompted either by them when their objectives change or by us if we need to make an adjustment, we are there to guide them with the construction of the plan. By telling them we are along for the ride and that the plan is a living document, it can bring a sense of proper perspective and comfort to the client.

My role with my client is to make sure I can come up with solutions that are appropriate for them. Sometimes that will mean we have heart-to-heart talks so that we can better understand them. If we do that and actively listen to our clients, then we can deliver genuine planning advice that we are proud of.