By the time families work with an advisor, children can often be older than 25, 30 or 35 years old, said Ell, “so it’s difficult to change behavior.”
Second Home
Clients often see a second home as an aspirational goal, said Sullivan.
“This is more a math game,” said Sullivan. “The perception of a second home is often times misguided. If you have clients wealthy enough to own a second home with no impact on their lifestyle, awesome, but it’s not complicated math.”
Zmistowski described one wealthy couple moving after retirement from the Washington, D.C., metro area to a retirement house in Florida who wanted to keep their original home to visit with friends. After doing the math for the client, he was able to tell them that it would be cheaper to stay in the penthouse suite in the Washington Ritz Carlton hotel than it would be to keep a second home.
Other families want a vacation home for emotional reasons, said Ell.
They envision being there with their family gathered in the summer, but in reality none of the kids want to go to the beach house. "They’re too busy, they have families of their own and it’s just not going to happen,” said Ell.
Over-spending In Retirement
“This happens especially in clients who don’t have the resources to live the life that they think they should be entitled to,” said Ell. “You have to tell them that their burn rate is too high and that they’ll run out of money. We can’t see ourselves more than five years into the future.”
People also tend to have a positivity bias when thinking about their future and often can’t consider potential worst-case scenarios, said Ell. ““Clients can’t envision a bleak future,” she said.