Because the information required for a financial plan is sensitive, it’s possible some
clients may be reluctant to share certain things. That’s one reason it’s important to let
them know that without all of the detail, a proper diagnosis and plan cannot be done, said
Max Horne, CFP, a 27-year MDRT member from Fife, Scotland. “We tell them many
of our clients tell us things they don’t tell their spouses, but all the information we
collect during the initial discovery process is confidential,” he said. “This opens up
clients to tell us about all sorts of different things.”
Of course, it can be challenging to address some of the difficult issues that come up in these discussions. A panel of MDRT members shared how they address a variety of tough topics with clients.
If they worry about having enough money in retirement:
“If they have enough money to retire but are concerned about how to generate their income, we break down their savings into five key areas: minimum guaranteed income, risk management, discretionary spending, toys and estate goals,” said Adrian Michael George, CFP, TEP. This ties clients’ assets to what they want to achieve, rather than a linear plan of a fixed income amount.
“This helps them understand their assets, rather than shopping for the best rate in a fruitless search for yield,” said George, a seven-year MDRT member from Calgary, Alberta, Canada. If the client doesn’t have enough money, George addresses their concerns in a few ways, such as reduced working hours but for longer than their full-time planned retirement date.
Business owners have a different challenge: the power shift from producing their income to being reliant upon another to produce it. “That’s a very intimidating shift and is often the real concern about their retirement income planning,” George said.
If a couple has different levels of risk tolerance:
“I call it a diversified plan when one person is more risk-oriented while the other is more risk-averse,” said Sylvia Brim, CPA, CFP. In this situation, she’ll create a balance between their employer plans and their personal accounts.
“After a year of investing according to their risk tolerance, we compare the performance, then adjust based on their comfort level,” said Brim, a 27-year MDRT member from Cedar Rapids, Iowa. “Risk changes with age and current situations, so we address it annually.” If clients still hesitate to provide information: “We had a client whose wife inherited a substantial amount of money from her parents but kept it in separate accounts that we did not handle, and we discovered why: She had a gambling habit that dwindled the inheritance down quite dramatically, and she was afraid to tell her husband,” Horne said. Without getting the complete truth, advisors can’t plan properly. “We cannot give a comprehensive diagnosis without having comprehensive information.”
How to make sure clients trust you:
“Be open and honest with the situation presented to you. Sometimes you will have clients who have cash flow from investments and assets for the future; this is a time to congratulate them on their position,” said Roy Hall, ADFP, a 12-year MDRT member from Gold Coast, Queensland, Australia. “Sometimes you will be with clients who have not adequately prepared for retirement. Funds are low, and assets don’t exist. Unfortunately, you need to discuss their only options.”
Brim earns trust by getting to know clients personally. “I am not in a hurry to get them to make a decision. I want them to feel good and have peace about what we do,” he said. “The more they trust you from the start, the easier it is managing changes.”
If they struggle to understand the importance of long-term planning:
George likes to ask clients if they think Nortel (in Canada) or Lehman Brothers (U.S.) made their bad decisions right before their collapse, or even when times were good. This relates to making decisions when the clients is in good health and has a good income. George also uses a football game as an analogy for how clients should create their short-, medium- and long-term goals. “Rarely does the Hail Mary pass work; the team more often succeeds with the short-term goal of the next down to achieve the longer goal of the touchdown,” George said. “You need to keep the long-term vision in mind as we make the short plays today.”