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.

Underliving Wealth
Another big drag on retirement is when clients “live in too much fear that things are going to go wrong and therefore they have to continue to put their arms around their wealth and they are afraid to spend it,” Sullivan said. 

This can cause big fights between spouses. Not long ago, Sullivan said he met with a man who was retiring. The man’s wife was looking forward to traveling the world, but the husband was worried that they couldn’t, even though they had three times more money than they needed, Sullivan said.

Sullivan suggested that they create a separate account, call it “a bucket of money” and do whatever they wanted with it. They would still have had enough to be comfortable if they blew what was in the bucket. The couple had a blast on a monthlong trip to Europe, Sullivan said.

He added that sometimes you have to give people “permission” to spend a little of their own money.

Healthcare
Research has shown that retirees can expect to pay well over $300,000 in costs for healthcare. Sullivan said the key to dealing with it is to help clients prepare for it.

What they don’t want to do is keep their heads in the sand and avoid dealing with it. Sullivan said, “Our role is to make sure we are talking to the clients in advance about it and giving clients time to be thinking about it.”

The advisor’s job is to look at where the potential risks are, and that includes healthcare risks, not just for the clients but also possibly for the clients’ kids and parents, he said.

Starting A New Business
People sometimes get so restless in retirement that they think of starting a new business—by themselves or with friends. They could be in for trouble, Sullivan noted. “It’s probably some of the biggest mistakes I have seen some people make,” he said. “It starts out small, but then you don’t want it to die so you keep pouring capital in it.”

In these situations, he usually sits down with the clients and talks through the business plan and walks them through the “five P’s”—purpose, people, process, profits and pricing. “If they haven’t thought those things through, then they are not ready,” he said.

Elder Fraud
This is another growing problem and troubling threat to retirees. With people living longer, there are more wealthy people over age 60, and they are being targeted by fraudsters. Sullivan noted that his mom often gets fraudulent calls, which she reports to him. Email phishing is another scary phenomenon.

In these situations, he said it helps if the clients’ assets are with an advisor who has some oversight and control over them. Financial fraud not only affects the elderly, he said. “It comes from all directions. You just have to be mindful.”