Sometimes it's a bad idea for a client to take a buyout and retire early. But convincing the client of that may not be easy.
When's the last time you tried to talk a client out of retirement? I recently met with someone who's expecting a buyout that he already knows he can't pass up. The problem is, he loves his job and maintains a senior ranking which affords him a flexible schedule and enjoyable assignments ... not to mention the fact that he hasn't the least idea what he'll do when he retires.
Still, the money makes it just too tempting. This client could, I guess, use it to hire a coach, get counseling or even rent some office space as a means of staying engaged and relevant. But is that the best plan of action heading into retirement? Whether it's a buyout situation or a more traditional decision to retire, no one is better positioned than a financial advisor to help clients make a more purpose-driven decision by removing them from the herd mentality, using familiar sales strategies to challenge their future plans, and eliminating fallacies about retirement including second careers.
The Herd Mentality
Just as bad investment decisions are made over the lunch table by accepting the consensus advice of co-workers, the same thing can sometimes happen when it comes to retirement decisions, especially when a buyout option is involved. Usually, once the offer is made an advisor or someone else crunches the numbers and BAM! all those who don't take the buyout (including your client) supposedly belong in the psychiatric ward. The stigma of "missing the boat" can be hard to overcome. It's a form of peer pressure that has far-ranging implications. Mindful advisors can step in and play a vital role with some simple questions designed to remove the pressure and position clients to help make the best decision instead of one driven by emotions or someone else's perspective.
Who established the rule that it's best for all to take it?
What is the basis for that opinion?
What are the cracks in that theory?
What are the pros and cons of doing what others have said versus sticking with your own beliefs?
What are the pros and cons of going against your initial thoughts and beliefs?
Typically, you won't get too far down that list of questions before a light bulb goes off and your client begins to separate themselves from the group's thinking. As an advisor, I think it's important to challenge the status quo of retirement planning and help people reach beyond the financial aspects and herd mentality of retirement decision-making. And that's a simple yet powerful way to start the conversation. "Mr. & Mrs. Smith, I want to take a moment and challenge the thought process behind your decision to retire based on your acceptance of this buyout incentive. I'm doing this to make sure we're considering all the variables, just as we do with your investments."
This process can be fun and interesting, as well as extremely valuable for your long-term relationship because you'll better understand what makes the client tick and how this kind of decision contributes to a successful transition into retirement.
New Twist On A Familiar Sales Strategy
When I started in this business I was taught a number of techniques and strategies to help me hit my numbers and keep my job. One of those was, of course, to influence people by getting them to nod their head "yes" several times before I closed the deal. While I haven't used that technique to generate new business in quite some time, I've found it invaluable in both a personal and workshop settings as a way to help clients see their retirement decision more clearly.
"It sounds as if you're comfortable with the idea of getting a second opinion about whether you should take this buyout and retire now, Is that correct?"
"Is it fair to say that other factors, including what you'll do with your time, how you'll stay connected with friends, whether you want to golf every day or start a second career, are just as important as the financial aspects of this decision?"
"If I could walk you through both the numbers and ask some questions about those non-financial factors would you be willing to take a deeper look at the total impact of this decision?"
Those questions are more common for my retirement seminars and workshops, but as you can see, they offer advisors a simple and familiar process for engaging a client at a different level ... not just a financial one. It's incredibly important for advisors who want to increase their visibility or to differentiate themselves as retirement experts to be skilled and knowledgeable about how to work with -- and if necessary influence -- clients, in order to get them to think and concretely plan for more than just the financial impact of the buyout on their retirement decision.
For the client I mentioned in the beginning of the article, you and I both know that money alone will not keep him happy, connected to his family and friends, nor physically able to meet and interact with others. Cutting the cord based on misguided perceptions and before he's ready can be stressful and toxic to his golden years. Generally speaking, there are no "do-over" buttons that magically take clients back in time to the same pay, status and perks they had once before, which makes it just as important to know when not to retire as it is to know when to call it quits.
Too often people approach retirement with grand thoughts and ideas that are grounded very loosely in reality. It's as if they imagine there is some kind of magic line that they cross over when they retire, and that everything is better because they have more time, less responsibility, and years of work knowledge and wisdom behind them. Sadly, some of those beliefs and ideas stem from our own industry as we paint beautiful visions of a perfect retirement and fail to help them prepare for the challenges that lie ahead as well.
The truth is, there's a dark side to retirement, too, that includes addiction, depression, and even suicide for some who aren't prepared to lose their work identity of fill their time productively (see The Dark Side of Retirement). The reality is retirement can magnify issues involving a spouse, physical or mental health, or money, in effect adding to existing problems and daily stress instead of creating this mythical utopia.
On several occasions, my clients who were considering a buyout option alluded to a second career or starting a business. While both are admirable, I find most people are thinking it's a possibility when there's no real foundation to support it. They approach it like they're coming home from college and need a summer job. They often end up frustrated because there aren't many jobs available that fit their desired schedule, utilize their skills or provide a wage that makes it worth their time or energy. Furthermore, for those who want to venture into the business world, many find that franchise costs, tax and legal considerations, and just the time and energy it takes to run a business to be more than they bargained for. For clients who go into this next stage of life with fallacies instead of strong foundations, they may find it better for their overall financial situation as well as their marriage (and mental status) to stay in an environment where they know the game and players instead of heading into unchartered waters.
Advisors need to remind clients that retirement isn't always a safe, happy little place. It's actually nothing! It's completely empty and can only be filled by the things they bring to it. So, for clients who aren't bringing much to the table outside of money they are essentially bringing a knife to a gun fight ... but it doesn't have to be that way.
Advisors today have a powerful position when it comes to preparing and helping a client transition into retirement. It begins with removing them from the herd mentality, using your skill to influence others to help them recognize all the factors that will impact their ultimate retirement decision, and finally eliminating fallacies about the final phase of their life by building realistic plans and strategies instead of loose ideas. If you haven't already, don't be surprised to find yourself talking a client out of retirement sooner than later.
Follow Robert on Twitter @robertlaura. He is the president of SYNEGOS Financial group, co-founder of RetirementProject.org, creator of the Laddered Dividend Portfolio, and author of Naked Retirement. He can be reached at email@example.com.