If clients are dissatisfied with how much money they're saving for retirement, most wealth managers advise cutting back on expenses. Planner Robert Pagliarini thinks that's not enough. Advisors, he says, should also help clients find ways to boost their incomes.
"Planners look for opportunities to reduce expenses, but a lot of clients don't want to sacrifice for 40 years just to squeak by in retirement," says Pagliarini, president of Pacifica Wealth Advisors in Mission Viejo, Calif., and author of The Other 8 Hours: Maximize Your Free Time to Create New Wealth and Purpose.
"A lot of clients don't like the option of living an okay retirement and a crappy life, or a decent life and a crappy retirement. They want a third option - let's have a nice life now and a nice life in retirement," he says.
Traditional financial advice focuses on depriving, reducing, cutting and eliminating, Pagliarini says. "Stretching your resources is a good idea, but when the entire focus is on conservation, getting by and making do, you lose the capacity to identify opportunities.''
Pagliarini explores with clients ways they might make more money in their free time, a focus that an increasing number of retirement planning advisors offer as more clients consider the daunting costs of living comfortably in their elderly years.
"A lot of times, when we're speaking with a client about his wishes and goals, when it comes down to it, it's just dreaming, hoping and wishing," Pagliarini says.
"They don't necessarily want to do what it takes to get those dreams. So it's really important for the planner to project out, 'Here's where you are, the income from your investments that you could make. When you retire in 15 to 20 years, this is approximately what your assets are going to be.' If they are happy with that, then our job is a whole lot easier," he adds.
BOOSTING FLATTER PAYCHECKS
More than 7 million Americans work more than one job these days, according to the U.S. Bureau of Labor Statistics. Americans are finding they must add to decreased or flattened salaries in their primary jobs. Others need extra income to cover debts or higher payments on adjustable-rate mortgages that have reset. Popular side jobs include child care, lawn care, handyman services, bartending and freelance writing.
When clients are dissatisfied with their current earnings and future prospects, Pagliarini helps them realize their passions and imagine how they could earn money from them. If a client is considering starting a side business, Pagliarini recommends ways to improve skills, such as joining Toastmaster's International to become better at public speaking and leadership.
Many community colleges offer entrepreneurship classes, teaching students how to write business plans, market, search for partners and startup capital, hire and prepare for potential legal issues, such as forming corporations or creating sole proprietorships.
Pagliarini might suggest ways clients can improve their status at work, making them better candidates for promotions. Employees can take classes to polish their negotiation skills, learn how to network or develop better relationships with their bosses.
Pagliarini says he regularly gives clients books to read, including, Take the Stairs: 7 Steps to Achieving True Success by Rory Vaden,about creating self-discipline, and Never Eat Alone: And Other Secrets to Success, One Relationship at a Time by Keith Ferrazzi, which dissects ways to network.
"Financial advisors usually focus on financial capital, but planners should also focus on the person - human capital - the abilities, strengths, things they can bring to the table to help improve their situations," Pagliarini says, adding that he believes he ultimately is helping people to become happier overall.
"Once people start improving themselves - taking a class, reading books, boosting their skills - they often have an entirely new outlook on themselves and their lives," he says. "They don't feel stuck anymore. They may be at the same job, but they are not stuck - they are growing, and they stop feeling like they have little or no options."
Not every financial planner feels coaching is right. Thomas Howard, a planner with David A. Noyes & Co. in Elgin, Ill., says discussions about goals with clients sometimes leads to conversations about raising income or changing jobs altogether. He says he does this only when clients pay for higher levels of service, particularly those with assets under management.
For the mass affluent, however - Howard's principal clientele - he usually recommends software programs that might help clarify goals. In some cases, clients will mention a desire to make more money.
"As a planner, the ultimate relationship is where you are just enmeshed in your client's life, helping them have the greatest success that they can - and that includes fulfillment," Howard says. "Now, how many of us have clients who want that and will pay us a living to help them do that? You're talking about a small slice of the population."
Still, Howard says, he discusses supplementing income in certain situations, such as with newly divorced clients, parents worried about paying for their teens' college educations or clients heavily in debt.
"For a lot of people, the deal really is, how do they manage their debt," he says. "That's a problem that comes about way too often in the mass-affluent market."
Plenty of planners aren't comfortable discussing how their clients might earn more or find second jobs. "I don't feel like I have the right kinds of skills and insight to give them that kind of advice. It sounds more like a coaching discussion than a financial advisory discussion,'' says David Flowers, founder of D.A. Flowers & Co., in Berkeley, Calif. "I try not to give advice that isn't asked for. ... I look more to the client in telling me what they are trying to accomplish and I work with their own objectives and set of circumstances when coming up with a financial plan."
Alix-Marie Hall, a planner with MassMutual Financial Group in New York, says she sometimes advises clients to consider supplementing their incomes if they work just eight hours daily and don't have too many family commitments. Most of her clientele, though, are business owners, attorneys, architects, consultants and educators, the kinds of professionals who work more than 10 hours daily and have busy personal lives.
"Unless they dramatically need more money now, I wouldn't suggest'' trying to work more, Hall says. "But I would make sure they are sheltering earned income under changing tax laws so that they can get as much productivity as they can with their earned income."
CLUEING CLIENTS TO THE FUTURE
Catherine Seeber, a senior financial advisor at Wescott Financial Advisory Group in Philadelphia, says she has recommended that some clients take on extra work if they are caring for elderly parents or helping children through graduate school. She has questioned some clients as to how long they plan to care for others, particularly if they are spending so much that they can't save adequately for their own retirements.
"I ask them, what would happen one day when they run out of money? Would they want that person taking care of them?" Seeber says. "Ninety percent of them will then say, no, they would want their independence, and that's what makes them stop."
Rhonda Heineman, a planner with LPL Financial/Egermier Wealth Management Group in Omaha, Neb., says she's comfortable suggesting ways for clients to augment income, but generally just when clients are close to retirement and they have outstanding bills. Heineman says she has recommended to about 20% of her clients that they teach part-time, either online or at community colleges. As many as 15% of those she has advised have taken her advice, she says.
LEVERAGING JOB SKILLS
"By teaching a class, they would be leveraging their skills and getting paid much better than they would working part-time for minimum wage at Wal-mart,'' she says.
Heineman suggests that retirees consider part-time consulting positions similar to their previous jobs. Retirees possess essential insights into team-building and management that no new technological innovations can replace.
While most planners may not be as comfortable as Pagliarini is with encouraging clients to work more to meet their financial goals, many planners say that staying on the job longer or working side jobs benefits clients beyond the cash.
"Sometimes I also talk to clients about a job after retirement, but it's just not a matter of augmenting their income," Heineman says. "Studies have shown that if you keep busy, exercise your mind in a hobby or something else, that engages your brain, it helps with life expectancy."
Katie Kuehner-Hebert is a freelance writer in Running Springs, Calif., who writes for American Banker, Risk & Insurance and Advertising Age.