The stock market’s recent rollercoaster ride provides an opportunity for financial professionals to prepare their clients for the pops and drops of everyday life in retirement. Just as markets twist and turn through normal economic and business cycles, life itself has its own bull and bear markets, contractions, expansions and range-bound trading activity.

By drawing valuable life lessons from challenging market scenarios, advisors can reduce clients’ emotional decision making relative to both their portfolio and their personal lives while, at the same time, helping them strengthen their relationships and improve their overall well-being.

Over time, the role of a financial advisor has grown significantly. People trust us with their livelihood and very often turn to us for personal advice and support. Clients also expect us to be on top of things, capable of explaining what is going on in the world, and then translating it into financial strategies.

When you think about it, much of the information we gather and interpret can also be applied to an individual’s (or couple’s) everyday life in retirement. Having the ability to frame individual life-planning issues within a financial context can be especially helpful if you have market-savvy clients who find it more difficult to engage in these more personal conversations.   

Spill Over

Over the past year, the price of a barrel of oil has dropped 70 percent, pushing both gas prices and the stock market down. Consumers may be paying less at the pump, but their 401(k)s and IRAs are paying a higher price in terms of losses due to market uncertainty. While oil only represents a small portion of the overall economy (comprising just 8 percent of the S&P 500), the troubles within that sector are spilling over to other areas.  

Spill over often happens to clients in retirement as well. The loss of a regular work schedule can spill over into weight gain, alcohol dependency or addiction. A change in household roles can leak into and, thus, weaken relationships. Health complications can be like nagging drips, constantly reminding one of routine tasks that can no longer be done. While it’s difficult to forecast the outcomes of problems in the market, predicting the arise of potential problems in retirement doesn’t take a crystal ball; they become clear once clients understand the risks associated with the mental, social and physical aspects of retirement.

To illustrate, consider when you build a client’s portfolio. You probably use a risk-tolerance questionnaire that includes factors such as timing, asset value, comfort with losses and preferences for gains. You match up their responses with an asset-allocation model that provides the best risk-to-return ratio. Clients should be taking similar steps in their non-financial life.

You help them accomplish this via a series of non-financial questions that illuminate such key factors as identity, social networking, relationships and physical health.

  • Who are you when you are not working?

  • How big is your social network?  How would you rate your level of involvement with friends?

  • Do you follow a regular exercise routine and nutrition program?

  • How would you describe your relationships with a spouse/significant other, children, grandchildren, colleagues still working; community, church?

  • What have you put on the back burner that may come back to bite you during retirement?

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