In most of his meetings with clients, Greg Sullivan poses the question, “How do you think you can fail in retirement?”
It puts a different spin on the meetings, he says. “It makes them think, like ‘Maybe I need to worry about it or maybe I need to think about it,’” said Sullivan, principal and co-CEO of Sullivan, Bruyette, Speros & Blayney, which was recently acquired by Creative Planning.
Sullivan said he first posed the question at the end of a successful meeting with a prospective client who had just sold his business for $150 million. The client, he said, did not have an answer to the question, but was curious where Sullivan was going with it. “I said, well, it’s not having the money. It’s not having the wealth. It’s all the other things that you can do that can actually screw it up.”
When the client asked for examples of those problems, Sullivan rattled off what he calls the “Big Three”—divorce, adult kids and lavish spending on big items such as second and third homes.
Sullivan, who spoke at the “Next Chapter—ReThinking Retirement” virtual conference hosted by Financial Advisor, is also the author of Retirement Fail—The 9 Reasons People Flunk Post-Work Life and How to Ace Your Own. The title of the book, he noted, was inspired by the meeting he had with the then-prospective client.
The book, Sullivan said, is to help people think beyond investing and retirement preparation and look at “all of the other things that trip you up.”
Divorce
Getting a divorce, Sullivan said, is not only devastating to your wealth but also to your emotions. He said his colleagues involved in family consulting are swamped with clients seeking to uncouple. “My expectation is that we are going to see a higher rate of divorce coming,” he said.
He noted recent data showing that the fastest segment of soon-to-be divorced people are over age 50. The reasons for that, he believes, are that their kids have gotten older and are getting out of school at the same time people have more options and there is much more of an acceptance for getting divorced. “You really have to be prepared after that change on how you are going to manage, because it changes your income source, your assets, and that’s a pivotal time for people financially,” he said.
Adult Children
Next, he spoke about adult children being a drag on their parents’ retirement. Sullivan said wealthy parents have enough wealth to lavish money on their kids. “But if your kids end up not doing well or not being happy over other issues, you are not going to have a happy retirement,” he said.
He relayed the story of a family with four children who all had careers. One of them was a relatively successful doctor with a home on the lake and a private plane, and yet the child continued to freeload off the parents, who figured that helping was their job.
Sullivan recommended that they turn the situation into a business arrangement. “And so, what we ended up doing was we turned everything into a loan. So if you needed money, there is going to be terms and a payment plan,” he said, adding that this was done to ensure that everybody was treated fairly.
Second And Third Homes
People often believe these are good investments, but that’s not necessarily the case, Sullivan said. “They are just cost-consuming assets.” Clients might make some money off these homes, he said, “but it’s not the kind of return that they think.”
It’s different if the second home is a rental, but “if you truly just want your second home and if you are not going to be staying in it at least three months a year, you might as well rent a home.” It’s a different issue if the clients have the capital, want the second home for their lifestyle and aren’t worried about the return.