• Are you still ______________ (going to church, playing bridge, volunteering at…)?
The answers to questions like these reveal a lot about a client’s social network. Ho-hum, glass-half-empty answers may indicate that there’s something deeper at work, raising a red flag about future distribution requests. It’s also critical for advisors to know that warning a client that they may run out of money sooner than expected if inordinate withdrawals continue will often fall on deaf ears. Some client’s simply can’t hear you because other basic human needs aren’t being met, in which case money doesn’t matter. It’s too far down the list and they’re using money to try and fill emotional needs.
Therefore, instead of having a financial conversation, offer tips and resources to help them feel connected, valued, loved and relevant. You may want to provide them with copies of local class offerings; parks and recreation guides; or the local paper’s list of things to do, see and join. Don’t just hand it to them. Open it up and say, “Have you seen all the things going on locally?” “Thought about taking a class on cooking Thai food or vegetarian meals before that new kitchen goes in?” Ultimately, clients will have to take steps to address any ongoing issues, but you can position them to use their time and energy (instead of their money) to add more meaning to their life in retirement.
Not every advisor has the desire or skills to deliver these types of conversations face-to-face. That’s a primary reason why I created the Retirement Wellness Report, where I put these questions, ideas and suggestions in a monthly newsletter that clients can quickly and easily read. In some circumstances, this approach benefits you the most because it allows the client to see the problem and solution for themselves while positioning you as the empathetic professional.
Another EQ factor that can affect a portfolio’s value is family trouble involving a spouse, aging parent or adult child. Each has the potential to increase the client’s level of personal and financial stress. Among the most common issues is dealing with an adult child, be it a daughter’s divorce, a son getting hurt in an accident, or funding for a new business in hopes it launches the child out of the basement. Many people have trouble differentiating between helping and enabling a problem, which can become a disproportionate challenge for both advisors and portfolios.
Unfortunately, enabling incorporates the concept that money will help resolve the issue but, again, addresses only the symptom and not the cause. As long as money remains the primary solution, withdrawals will continue and deeper problems will remain masked. My guide, entitled Seven Retirement Questions You’re Afraid To Ask, addresses this and other sticky situations people hardly ever want to talk about -- or know who to talk about it with. I know many of you probably haven’t done any role playing since you first got into the business and were practicing sales calls, but it would be worth your while to run-through and rehearse answers to a series of difficult questions like these with colleagues before a client confronts you with them. (You can download a free copy of the guide here.)
Financial stress of any kind can negatively impact the client-advisor relationship. As many of you know, when funds get tight or are being redirected to other places than where a client may desire (aging parents care, for example), the need for greater returns (of course without taking excessive risk) moves up on the priority list. If you don’t find out what is going on behind the scenes and help the client make the connection, you may risk losing that client. Anyone can find an attorney willing to take their case for the right fee, just as there’s always an advisor in the neighborhood promoting higher returns or more bells and whistles.
Therefore, when a client calls and suddenly wants to be more aggressive, or change his allocation to include alternatives that don’t fit their risk profile, find out whether mom and dad are now living with them or if the marriage is on the rocks. When a client is financially stressed, you may need to adjust allocations, but more risk (more stress) isn’t necessarily the answer. That may seem obvious to us as advisors, but a lot of people have been trained to do the opposite; if they have a problem, they believe they just need more money to fix it. So advisors have to address the mindset as well as the rate of withdrawal. For advisors, that can require new skills, a network of resources, and involving those outside of their normal centers of influence (COI).
Here are some steps that advisors can take to improve their communication with clients:
1. Validate your client’s situation. It’s as simple as saying, “You’re not the first client to share this with me,” or “You’re not alone in what I hear you saying.”