Understanding Their Values

As many of you know, the fifth edition of The New Retirementality was published last month. The book includes lots of new research (more on that below) and plenty of new-to-this edition material, while retaining the time-tested tools and concepts readers have enjoyed and found useful over the previous four editions.

The book’s premise and promise hasn’t changed—empowering readers to live life on their terms. That empowerment starts with knowing what you want, and what you have.

According to a study conducted by the Certified Financial Planner Board of Standards, Inc., in collaboration with Heart+Mind Strategies Advisors, both financial advisors and consumers think that it’s easy to spend (84% and 77% respectively). No surprise at those findings, but that’s where the similarities end. While consumers think it’s easy to save (78%) and manage (88%) money, financial advisors have a different opinion: 39% think it’s easy to save, while just 30% think it’s easy to manage.

Sounds like a disconnect to me! Advisors know it’s not easy to balance spending, saving, and managing money. Almost half of the advisors included in the CFP study reported a mismatch between what clients are spending and their goals for saving. Almost all the advisors in the study (96%) agreed that getting clients to commit to cash flow management and budgeting makes them “more confident and secure about their financial futures.” It seems pretty obvious and makes complete sense. But the same study also reported frustration with clients regarding their unwillingness to change habits, as well as not providing a complete picture of their spending and savings habits. I suppose, for some, ignorance is bliss—if only temporarily.

In the new edition of The New Retirementality, I discuss the importance of purpose as part of the discussion advisors need to have with their clients. After all, if you don’t have a purpose, how can you establish a plan for realizing that purpose? As part of a study I worked on with Invesco Consulting Group and featured in the new edition, three dynamics of retirement—location, vocation, and vacation—were studied. Most participants (77%) felt prepared for retirement because they reached their “number.” As you know, having a number is important—critical, in fact—but it’s only half the equation. Defining your purpose has a critical impact on defining and achieving your goals as well as finding your number. Knowing what gives a client purpose can help both of you focus on the right plan to meet their goals.

A few open-ended questions from you can make a real impact in helping ensure that clients not only achieve their number but that they actually understand what that number means. In the same Invesco study, almost a third (32%) of respondents didn’t consider the benefits they would be giving up by leaving the workforce. In other words, having the money is great, but having no real purpose for it can very quickly send you adrift.

The same survey also reported that more than a third (37%) said their expenses did not decrease once they retired—in fact, many reported that they actually increased! Again, a few open-ended questions can help your clients understand where they stand, instead of assuming their expenses will go down.

Finally, even though volunteering proved to provide the biggest measure of purpose for those who were actively engaged in a philanthropic activity, more than half (60%) of study participants didn’t volunteer. This is another disconnect that your clients may not even be aware of. Purpose—whether it’s in the form of philanthropy, working, or something else—is critical to being fulfilled in life.

Your clients don’t always know the right questions to ask, but if prompted they’ll provide the answers you need to provide them with a plan that will allow them to live life on their terms. A good place to get the conversation started is by having your clients compare how they spend their time now (168 hours per week) with how they’ll spend those hours in retirement. Your client will probably be surprised at the results—most of us have not given enough thought to how we’re going to spend time once we’re no longer working. A “Finding Balance” worksheet that compares the amount of time they’re currently spending working, sleeping, engaging with family and friends, and more, is included in the new edition.

Remember, goals are not just financial. In fact, the only reason financial goals exist are to support purpose goals.

Every client is unique, so it’s important that you understand their values (as opposed to focusing on what your values are). Be sure you regularly review their cash flow status and ask them what has changed since your last meeting. Remember:

1. Having a purpose is as important as having enough money. Helping your clients achieve financial security is a primary function of all financial advisors—which means it’s also a commodity. The advisors who help their clients discover purpose and fulfillment, along with financial security, are the future of the industry.
2. If you’re not enjoying what you’re doing because, for example, you are trying to manage an unrealistic number of clients, and otherwise not taking time for yourself, you’ll be miserable—and so will your clients. Not only is balance critical for the clients you serve, it’s critical for you!
3. Don’t give your clients a reason to choose auto-investing: machines can probably choose investments as well as you can, so why try to compete that way? Clients want to work with you because of your added value: context, introspection, and caring. No machine can deliver that.
4. Let your clients do the talking: ask questions that they can’t answer with a simple “yes” or “no” so you can learn more about what’s truly important to them.
5. Focus on your clients, not on their money.