According to a recent survey by Fidelity Investments that’s the number it would take to make the average American millionaire feel wealthy. Considering less than 2% of the population has even $1 million in assets, how can we help our clients feel secure when they fall short of their own expectations? The answer may be in helping them first achieve financial maturity.
To many people, financial security is defined as freedom from worry. It's a state of being so confident in your financial situation that you no longer worry about whether you'll have "enough." But psychologists tell us confidence has two elements – a mathematical element and an emotional element. Every day, we as planners utilize Monte Carlo simulations, Modern Portfolio Theory and a host of other tools to help minimize the mathematical risks and increase our – and hopefully our client’s - level of confidence that the financial plans we create will succeed.
But regardless of how high we boost the mathematical confidence, it’s the emotional element that is so often missing. Regardless of how much money they have, clients often feel they need just a little bit more to really feel comfortable. In fact, studies show it doesn’t matter if a client has $500,000 or $5 million, the typical retiree feels they need approximately 25% - 30% more than what they currently have to really “feel” secure. It’s like the old riddle that asks if a grasshopper jumps half way to a finish line with each jump, how many jumps will it take to reach the line? The answer of course, is infinite. If he only jumps half way each time, he’ll never get there. Our clients are a lot like that grasshopper – the math can only take them so far. Eventually they need to take that last emotional leap.
What prevents our clients from making that final leap? For many the missing ingredient is what I call financial maturity – understanding their own attitudes and beliefs about money. Many of our clients are pre-set with negative attitudes or beliefs learned in childhood that they no longer even consciously recognize they continue to hold onto today. These may include attitudes of scarcity, generosity, values or self-worth that erode the confidence they feel in both their financial plan and in you. Let’s face it, if they are not fully confident in their financial plan, they’re not fully confident in you.
For all of us, examining the source of our attitudes and beliefs around money allows us to discard those that no longer serve our purpose. It then allows us to create a new set of attitudes and beliefs that are aligned with our values and priorities. By aligning our attitudes, beliefs and actions around money with our personal values and priorities, we can close that emotional gap that prevents us from feeling totally secure. Helping your clients recognize and consciously choose to accept or reject those unconscious attitudes and beliefs can help them make that last leap to feeling secure and cement your place as their trusted advisor.
There are a number of worksheets and exercises you can use to help clients uncover their beliefs about money at http://www.retirement2020.com, but I’m also curious what exercises you’ve found that work well. Email me your ideas at firstname.lastname@example.org.
Keith J. Weber, CFP®, CPRC, is a speaker, author and founder of Weber Consulting Group, LLC, a financial advisor training, coaching and practice management consulting firm focused on providing life planning skills to advisors. Through the website Retirement2020.com, Keith provides tools to advisors and clients to help build stronger client relationships. Keith maintains the CFP® designation and is also a Certified Professional Retirement Coach. His latest book, Rethinking Retirement, was released in July, 2010. For more information visit www.kjweber.com, www.Retirement2020.com or connect with Keith on LinkedIn.