9 Ways to Keep Clients From Overspending in Retirement<br><br>
Well, your work is far from done.
Not only are clients demanding more from you in terms of retirement income ideas, theyre also living longer and incurring spiraling health care costs at the same time theyre taking first-class cruises through the Caribbean or more likely providing financial support to their kids and grandchildren.
Even the best-laid retirement plan can come unraveled if clients and their advisors arent proactive about setting reasonable spending limits and sticking to them.
Heres an interactive slide show detailing nine ways advisors can keep their clients from overspending throughout their retirements.
Source: Kirk Hulett, executive vice president of strategy and practice management for Securities America.
1. Remind Clients They Still Need Advice From the Pros<br><br>
There are numerous ways to help your clients curb their spending by using a process, including developing and documenting a budget, coaching, gathering financial information, tracking expenditures, and creating a follow-up plan. Then for serious overspenders, a professional therapist may be needed.
2. Create a Spending Plan, Test-Drive It<br><br>
You might want to create the plan and budget and ask the client to live with it for a few months before they retire. Its a good idea to test-run a budget this way so there are no surprises and the plan can be adjusted well in advance. This way, both you and the client can get an idea of how realistic the spending plan will be for him or her during retirement.
3. The Dreaded B Word<br><br>
Because the word budget might meet with mental resistance from a client, you might consider using the phrases written spending plan or formal spending policy to describe a thoughtful approach to expenses and spending expectations. Most processes for creating a spending plan include having the client write down each expenditure. A higher-tech option is for the client to use only a debit card for one month, then use their banks account management platform or an account aggregation website to categorize and total the expenses.
4. Organize, Visualize All Expenditures<br><br>
5. Keep It Real<br><br>
This being the case, developing a realistic spending plan may require several months. As mentioned, emotional overspending may require the help of a trained mental health professional as well.
6. Start Gradually<br><br>
Clients may choose a certain type of expense to reduce or eliminate, like going from a cappuccino every day to once or twice a week, or they may do better by setting a dollar amount, which works well with the discretionary cash envelope method described earlier. As clients maintain their spending plan, they can shift those funds to regular deposits to savings or investment accounts.
7. If It Gets Really Bad, Involve a Professional Therapist <br><br>
Enlisting the help of a mental health professional may help you better serve clients needs and change their destructive behavior. The best approach is to involve a mental health therapist (not instead of your services but in collaboration with your services), addressing the clients emotional issues while still pursuing good financial strategies.
8. But Do It Delicately, Objectively and Professionally<br><br>
You should interview several therapists before involving them in the client relationship or referring clients to them. You and the therapist should have strong rapport and mutual respect. Therapists with a background in finances may be particularly suitable for working with clients with emotional overspending problems.
9. Make Sure They Know Youre In It Together<br><br>
Don’t forget this important point: your conversations with your clients about overspending and keeping them on track can lead to deeper client relationships and higher client satisfaction levels. And that’s what everyone is striving to achieve. Good luck.