Advisors should seek to help clients understand that expecting their children to take responsibility for their own financial lives does not mean they are not providing for their kids. Moreover, it does not reflect poorly on them if they do not step in to resolve financial challenges their kids may encounter as they get older, such as excessive credit card debt or a failure to save. Rather, it simply means that the clients are preparing their kids for their role on their retirement team.
4. For entrepreneurial kids, stress the importance of profits—not just revenue. Once clients’ kids understand their role in controlling their own finances, some may want to start side businesses, whether it’s mowing lawns, selling lemonade or something else. Obviously, parents should celebrate this type of entrepreneurial spirit—but clients shouldn’t think their job is done just because their kids are doing yard work to pay for college.
Here again, clients can teach their children valuable lessons by resisting the urge to play Santa Claus. If a client’s child is mowing lawns, advisors should urge the client to make sure the child pays for gas (both for the mower and for travel to the job site). While it may be tempting for parents to absorb these costs, doing so can create unrealistic expectations of easy success for their kids and deny them the opportunity to learn valuable lessons about how businesses function.
Clients looking ahead to retirement should understand that their children can be a major asset in helping them achieve their retirement goals, but only if they consciously train their kids to be part of their retirement team from an early age. As trusted financial experts, advisors can add tremendous value to their existing relationships by helping clients meet this challenge head-on.
Greg Powell is president and CEO of Fi Plan Partners, a wealth management and financial planning firm based in Birmingham, Ala.