We’ve all heard of sweat equity. It’s often associated with real estate, but is also common in building a business, and I would guess you have put a substantial amount of it into building your own practice. In the traditional sense, it’s defined as the non-monetary contribution individuals make when working on or developing a project.
For example, a person fixing up and selling their house spends time and energy renovating their property instead of paying someone else to do it, or a new company’s founders forgo any payment and instead use their time to build a new business.
Adding sweat equity to the retirement planning process is the next step for the financial services industry. No, I’m not talking about trading your time for a stake in a client’s 401(k) or IRA, but rather, I’m talking about adding non-monetary units to the planning process.
In other words, enhancing the value you bring to the relationship by helping clients plan for the non-financial aspects of retirement including things like replacing their work identity, filling their time, helping them stay relevant and connected as well as keeping mentally and physically active.
Fact of the matter is, more and more advisors agree that the financial planning process and investment management are becoming a commodity—one with shrinking margins thanks to low cost trades, robo-advisors, and free online software. Don’t get me wrong, financial services is a great industry and one I am proud to be a part of, but the game is changing and if you want to stay at the top of it, you have to be open to making simple adjustments.
For example, the spouse of an existing client retired last month and they came in to roll over his 401(k). During the conversation, I asked how retirement was going. He replied, “It’s going okay.” Which happens to be code for, “It’s not going as planned.”
So, with my social work and coaching background, I probed a little further. “Are you finding that there are things that you miss about work or that you are struggling with now that you have more time and less structure?”
I barely got the question about out before he said, “I’m struggling without having any accomplishments. I have plenty of things to do, but I don’t feel like I’m working toward something of value or that has to be done by a certain date or meeting, so I’m just not really doing anything.”
I realize not all advisors are trained to handle situations like this (even though I think they should be), the key aspect of this dynamic is to normalize his feelings and not feel like he is alone or the first person to go through it.
I replied, “You’re not the first client to be unclear as to how to deal with accomplishments in retirement, in fact it happens to a lot of people like you who were successful in their career and overcame a lot to get where they are when they are walking away. Nice thing is, I think you’re a step ahead by knowing where a gap exists in the early stages of retirement, so kudos to you.”