It seems that there is an endless debate over the role advisors should play on the soft-side, Emotional Quotient (EQ) portion of retirement planning and the hard side, Intelligence Quotient (IQ) stuff that relates to dollars and cents. 

Over time, I have uncovered several critical connections that can help resolve advisors’ uncertainty about the extent of their responsibilities, positioning them for success in both areas. Delving into the everyday lives of new and soon-to-be retirees reveals an amazing array of complexities and dynamics that play out in retirement. 

By searching for the reasons behind a request for an additional distribution, an unexpected change in portfolio holdings or a move to another firm, advisors can better serve clients by connecting the dots between EQ and IQ.

Two typical client-advisor interactions that illustrate the intricate connection are the request for an increased withdrawal and the sudden call to discuss a portfolio. On the surface, money may seem to be the issue, but money in any amount is no solution if there are deeper issues influencing their actions. Money is the tool we are all trained to reach for first when something needs fixing, but it’s a bad habit and dangerous strategy for retired clients.

Boredom Is A Multi-Billion Dollar Feeling
The financial impact that boredom has on a person’s retirement savings can’t be quantified, but it’s often the cause of frequent dips into an IRA or 401(k). When a client’s calendar isn’t full and the to-do list has become his nemesis, home remodeling shows, a stroll through the local mall, or even excessive time peeping into other people’s perceived lives on Facebook can lead some retirees to believe that “stuff” will resolve their feelings of boredom or lack of activity, and that’s when the portfolio drain begins.

Flip on the TV or walk into any retail environment, and within minutes you’ll be seduced by the immediate need for certain merchandise. Ironically, it’s not goods people want; it’s the parties, family interaction, smiles, and laughs subtlety promised by advertising agencies. They pitch an emotion or experience (sometimes more than the product), and that’s what people will deplete their savings to attain, particularly if they’re lonely, sad, or not feeling valued in some fashion.

It’s not uncommon for the boredom factor to account for an increase in a retiree’s annual withdrawal by over 100 percent; in some cases, doubling their established annual withdrawal. That means when $12,000 is supposed dribble out of the account over the course of a year, $24,000 flies out the door long before the year is over. While it may not be drawn down at those levels over consecutive years, averaging the cost of boredom-related purchases over a five or 10-year span can move a client’s withdrawal rates from safe to unsettling. It’s a losing game that both advisors and clients need to recognize can’t be won with money. The root cause is not being addressed, which is the basic need to feel happy, connected, safe and relevant. 

Advisors can use simple, conversational questions to uncover what’s behind an unanticipated request for funds.  Naturally, there are good reasons for a home makeover, a vacation or other purchases. Asking the following questions, though, can provide an advisor with insight, and may suggest solutions that can salvage dollars and cents.

• What have you done lately that’s fun, new or exciting?

• Any impending plans to visit family or friends?

• Are you still ______________ (going to church, playing bridge, volunteering at…)?

The answers to questions like these reveal a lot about a client’s social network. Ho-hum, glass-half-empty answers may indicate that there’s something deeper at work, raising a red flag about future distribution requests.  It’s also critical for advisors to know that warning a client that they may run out of money sooner than expected if inordinate withdrawals continue will often fall on deaf ears. Some client’s simply can’t hear you because other basic human needs aren’t being met, in which case money doesn’t matter. It’s too far down the list and they’re using money to try and fill emotional needs.  

Therefore, instead of having a financial conversation, offer tips and resources to help them feel connected, valued, loved and relevant. You may want to provide them with copies of local class offerings; parks and recreation guides; or the local paper’s list of things to do, see and join.  Don’t just hand it to them. Open it up and say, “Have you seen all the things going on locally?”  “Thought about taking a class on cooking Thai food or vegetarian meals before that new kitchen goes in?” Ultimately, clients will have to take steps to address any ongoing issues, but you can position them to use their time and energy (instead of their money) to add more meaning to their life in retirement.    

Not every advisor has the desire or skills to deliver these types of conversations face-to-face.  That’s a primary reason why I created the Retirement Wellness Report, where I put these questions, ideas and suggestions in a monthly newsletter that clients can quickly and easily read.  In some circumstances, this approach benefits you the most because it allows the client to see the problem and solution for themselves while positioning you as the empathetic professional.

Another EQ factor that can affect a portfolio’s value is family trouble involving a spouse, aging parent or adult child. Each has the potential to increase the client’s level of personal and financial stress. Among the most common issues is dealing with an adult child, be it a daughter’s divorce, a son getting hurt in an accident, or funding for a new business in hopes it launches the child out of the basement. Many people have trouble differentiating between helping and enabling a problem, which can become a disproportionate challenge for both advisors and portfolios.

Unfortunately, enabling incorporates the concept that money will help resolve the issue but, again, addresses only the symptom and not the cause. As long as money remains the primary solution, withdrawals will continue and deeper problems will remain masked. My guide, entitled Seven Retirement Questions You’re Afraid To Ask, addresses this and other sticky situations people hardly ever want to talk about -- or know who to talk about it with. I know many of you probably haven’t done any role playing since you first got into the business and were practicing sales calls, but it would be worth your while to run-through and rehearse answers to a series of difficult questions like these with colleagues before a client confronts you with them.  (You can download a free copy of the guide here.)   

Financial stress of any kind can negatively impact the client-advisor relationship.  As many of you know, when funds get tight or are being redirected to other places than where a client may desire (aging parents care, for example), the need for greater returns (of course without taking excessive risk) moves up on the priority list. If you don’t find out what is going on behind the scenes and help the client make the connection, you may risk losing that client. Anyone can find an attorney willing to take their case for the right fee, just as there’s always an advisor in the neighborhood promoting higher returns or more bells and whistles. 

Therefore, when a client calls and suddenly wants to be more aggressive, or change his allocation to include alternatives that don’t fit their risk profile, find out whether mom and dad are now living with them or if the marriage is on the rocks. When a client is financially stressed, you may need to adjust allocations, but more risk (more stress) isn’t necessarily the answer. That may seem obvious to us as advisors, but a lot of people have been trained to do the opposite; if they have a problem, they believe they just need more money to fix it. So advisors have to address the mindset as well as the rate of withdrawal. For advisors, that can require new skills, a network of resources, and involving those outside of their normal centers of influence (COI). 

Here are some steps that advisors can take to improve their communication with clients:

1. Validate your client’s situation. It’s as simple as saying, “You’re not the first client to share this with me,” or “You’re not alone in what I hear you saying.” 

2. Empower and listen. These conversations aren’t therapy sessions but they can gauge what’s going on if you ask, for example, “What do you wish someone had told you about this before it started?”  or, “What would you tell others facing the same situation?”  Both set you up to put a positive spin on the situation, reinforce that they are a leader/survivor and create the opportunity for them to vent a little without turning you into your client’s psychologist. 

3. Offer specific help and refocus your expertise. Don’t end the conversation by saying, “Well, let me know how I can help.”  It’s too broad, and can create unwanted expectations. Be specific on how you will help by providing them with a helpful publication or sending them a link via e-mail.  Finish by acknowledging your area of expertise. “You know the financial stuff is my area of expertise, so if you have questions or concerns in that area, just let me know.” It’s a focused way to button up the conversation and transition into what else needs to be addressed at your meeting. 

As we learn more about how people behave when it comes to money, and why they do so, the soft side of retirement planning (EQ) will continue to intersect with the hard dollars-and-cents side (IQ). That means advisors should understand both, and develop skills and resources that guide clients to reconsider financial decisions that won’t make them happier.

Robert Laura is the creator of the Retirement Wellness Report, co-founder of RetirementProject.org, and author of Naked Retirement. He can be reached at [email protected].  Please connect with him on LinkedIn and follow him on Twitter @robertlaura.