One of the most difficult aspects of being a physician is telling a patient they have a serious illness that will soon end their life. Bearing this bad news many times in my prior career developed my deep appreciation for the fragility of life.
It significantly shaped the way I now help people prepare for their financial future as well. Instead of focusing on retirement, in our firm we focus on helping clients live a full life now and build resiliency for whatever the future holds.
WE’RE NOT CLAIRVOYANT
When I became a financial planner, the focus of finance on predicting the unpredictable gnawed at me. Life and finance are great examples of complex adaptive systems. Just like earthquakes, factors such as rates of return, inflation, future taxation, career stability and life expectancy cannot be reliably pinpointed.
Why do we spend so much time trying to predict the unpredictable when the best way to approach a complex adaptive system is to prepare for the most likely occurrences? By falsely pinning client’s hopes on specific outcomes, the client and the adviser are set up for failure. The future we predict will not happen.
And what if a true Black Swan occurs? It isn’t just a serious market upheaval. It could be a terrible earthquake in California, a massive war, or even a widespread environmental disaster. If I’ve made my clients suffer inordinately by focusing mostly on the future, I’ve done them a grave disservice if the world really does fall apart. There has to be a balance.
Instead of spending an inordinate amount of time predicting the future, we need to switch to preparing for the most likely outcomes and create resiliency for the black swan events. Using the earthquake example, this includes building earthquake resistant homes so we survive the typical earthquake.
IS THE CLIENT LIVING A GOOD LIFE NOW?
In my work with dying patients, those who had the fewest regrets had the easiest time facing the great unknown of death. One of our goals is to help clients live fully in the present so they have no regrets when major life events occur.
In meetings with new clients, we explore job satisfaction, work life balance, family concerns and health. We also discuss goals for the future as these goals are often events that would bring delight if they happened in the present.
If clients are unhappy with any aspect of their life that financial planning will solve, we make that the primary focus. If the problem is job satisfaction, can we discover ways to bring back joy in their work? We’ve had clients cut back their hours, take sabbaticals and even go back to school to change careers. If family issues are eating away at current finances, we arrange the appropriate counseling. It is very rewarding to give clients the ability to make radical life changes that renew their vigor.
WHAT ABOUT THE FUTURE?
Balancing current life enjoyment with future preparations builds resiliency for any outcome. Cornerstones of good resiliency include savings, minimizing debt, maintaining health and tackling the bucket list before there becomes a need to make one.
The retirement discussion morphs into a conversation about financial independence. Many advisers focus the conversation on saving when the most important factor in creating independence is controlling spending. We review how a client spends money and determine what spending provides value. Many expensive items have ownership costs while experiences actually bring happiness. Identifying and disposing of physical assets in a client’s life that no longer bring meaning helps them simplify their existence and expenses.
This exercise subsequently increases the amount available for saving and reduces the financial burden when untoward events occur. The end goal is to have the client save as much as is comfortable while maintaining the lifestyle that brings the most joy.
LIFE BEYOND WORK
Our ability to work is our safest asset and we can control this much better than market returns. We share the history of retirement with clients. When social security began in the 1930’s, if someone retired at age 65, they had a 50% chance of living to age 72. With longevity now into the late 80’s, retirement can easily last 20 or 30 years.
For clients who may outlive their assets, depending on health and satisfaction with current work, we encourage working longer years but fewer hours. This will provide significant protection if portfolio returns are poor in early retirement. Even if a client has plenty of money, work provides social interaction and mental stimulation that is important for continued health and sense of well-being.
If staying in a current job is not option, get creative. Pet sitting through websites such as Rover.com provide excellent opportunities to make extra income and maintain flexibility. Seasonal jobs are another possibility.
If a client is truly ready to stop working, it is vital to plan for how they will spend their time. If needed, we connect them with volunteer opportunities that will make good use of their skills and wisdom. Our local volunteer physicians group greatly appreciates our efforts with retiring doctors.
How we work and age has changed and financial advisers need to rethink how they plan for these major societal shifts. Flipping our focus to the present and helping clients with what they can control results in a better current life and happier clients.