Why did Larry DeNoia, the president of ITI Strategies in Peekskill, N.Y., lose a client last winter? "It's nothing you've done," the client assured him. "We're moving away and my wife thinks we should have an advisor close by, so we can go in and talk face-to-face when we need to."
"Understandable," Larry said. "I will do everything in my power to help you have a smooth transition. I consider you a friend and I want you to work with someone with whom you'll feel comfortable, although I am disappointed.
"By the way," he continued, "when it comes to your investments, you know that I select money managers who I think will do the best job for you. These managers don't know you, but I do. So I do know how their best job will fit into your goals and dreams. I will know when it's best to make a change or stay put.
"Now when you go to this new advisor, he will pick what he thinks are the best money managers for you as well. Since we all have the same universe to pick and choose from, I think, at best, there will probably be little difference in how your investments perform.
"There will, however, be a difference in how much your advisor knows about you, your goals and your dreams. It will take time for him to understand how you react in volatile times and when to contact you to assuage your fears. In that relationship, you know you will need to start again," Larry told him.
The client again explained his wife's comfort in having an advisor in the same area. That left Larry no choice but to help move the accounts and information as efficiently as possible. Four months later, the phone rang. "Larry," said the ex-client sheepishly, "will you please take me back?"
Good planners like Larry know that, when a client wants to leave, there is little you can do to persuade them to stay. Nonetheless, you can make the trip more pleasant by offering to cooperate any way you can.
More important, since you know the departing client fairly well, you have a great opportunity to help set expectations for the relationship with the next advisor. That may be to your advantage.
I talk about managing expectations frequently because, to my mind, it is the core of what we do to keep clients on the appropriate path to their goals and to help them succeed in whatever plans they want to make. Over the years, I've developed certain skills in data gathering and the discovery process that I feel are effective.
One evening, my partner Harold and I were sitting at dinner with Bob Curtis, president of Pie Technologies, which makes the financial planning software Money Guide Pro. "So tell me," Bob asked, "how do you guys ask for the quantitative and qualitative information from your retirement planning clients?"
"The first thing I do is set the stage for the data gathering," Harold replied. "I say, 'There's a lot of material we're going to ask from you. It may seem at times overwhelming, but it's important that we get through it so we can craft a better plan for you.' "
My answer was similar. "I will ask you to bring all your statements, wills, trusts - anything in fact that may help us see a better picture of you and your financial life.
"Then, we will begin to have ongoing conversations about your family, values, goals and lifestyle. We want to all be able to visualize what you want your retirement to be."
"Stop, stop," Bob begged. "You sound like you've just dropped a hundred-pound bag of cement in their laps and are now asking them to do the tango with it. No wonder your clients grudgingly look forward to your meetings together. You've just made it a whopping big chore."
He explained that planning your future shouldn't be a chore, but exciting and fun. "After all, you have worked hard for your next phase of life and now you actually get to plan for it."
Bob developed a deck of cards depicting various life goals, such as houses, vacations, weddings and cars. He asks his clients to sort through the cards to see what goals they have. This active selection makes the goals more realistic and encourages essential conversation about their choices.
His idea made great sense. In fact, Harold loves to tell the story of a couple looking through the cards. One depicted remodeling a house. The husband tossed it aside immediately. The wife picked it up and put it back in the selected cards.
"Wait a minute," his usually quiet wife, blurted out, "Don't you remember that we said we would remodel the kitchen at retirement?" A lively discussion ensued and the card was eventually kept, representing not only the kitchen remodeling, but also two bathrooms and the family room.
"As I see it, the visioning is the fun part, thinking about options, choices and flexibility," Bob said. "For many, it's an opportunity they haven't enjoyed yet, since children, mortgages and family obligations happened before they could actually formulate a picture of where life might take them. "
"So," I countered, "what if your client hasn't saved enough for retirement or his or her resources have been seriously damaged by the recent recession? It doesn't sound fun to have to sit down and contemplate that."
"No," Bob agreed, "but the fact that your clients are sitting down and talking with you about it is positive. While the hard reality, after your analyses and estimate, may be that their original plans need some retooling, either small or large, they still gain great satisfaction and pleasure in knowing what their endgame is and essentially how it will be played."
EMBRACING REALITY, HAPPILY
After the Great Recession, large broker-dealers and custodians bombarded the public with ads depicting disillusioned investors who feared their life savings were circling the drain and their plans for retirement were disintegrating. One prominent firm even chose to make its message: "My wild retirement dream? Actually retiring."
Bob's premise is that it's not an all-or-nothing game. It's not that your clients can't retire, it's that they can't retire in the same way. Bob maintains that while most of us would like to have the optimal retirement, acceptable can still be plenty good.
It's important, then, to divide the retirement goals into three categories - needs, wants and wishes. The needs, of course, are the basic living expenses that must be covered. Wants are goals that are important, but not critical. And wishes are exactly that. If there is enough money in the end, those can be accomplished too.
Discuss with your clients how much might be acceptable to them regarding each goal, even if it seems out of reach. For example: "While you may not be able to pay for a $75,000 wedding for your daughter, Mr. and Mrs. Client, would $35,000 be acceptable?"
You need to work your way through the goals, including phased-in retirement techniques like part-time work or an extended retirement date. Fairly soon, a newly revised retirement doesn't look so bad.
What does this all have to do with Larry and his wandering client? Everything.
Larry's client missed the hard-earned relationship they had developed over many years. He missed the times they'd spent talking about the "fun" stuff. You see, it was Larry's planning expertise that helped his client move away to his retirement home.
Deena Katz, CFP, is an associate professor in the personal financial planning division at Texas Tech University. She is also chairwoman of Evensky & Katz, an advisory firm in Coral Gables, Fla.