Retirement planning is simple. At least, I am going to look at it in a simple way that may resonate with your clients and enhance your advice process, including the conversations you have and how you have them.
I am going to focus on the client and their needs rather than fixate on tax, law and product. I am interested in the life that people want to live in their retirement, and their ability to afford that.
Living the life
Financial advisers are not miracle workers; you can only work with what your clients have, but if you can understand their desired outcomes better than any other adviser, then you will have a better chance of connecting with your clients and securing committed and profitable relationships over time.
Even at my ripe young age, even with my qualifications knowledge and experience, if I strip away all the chaos that surrounds retirement planning, I can feel the fear of not having enough.
We all know the shocking South African retirement statistics, and enter longevity into the conversation, and see the further need for clients to seek good advice.
The process
What clients really want to know is when their money will run out and whether they’ll be ok.
Assets, liabilities, incomes and expenses paint the current picture; but it is the planned picture for which strategies and actions need to be developed. Good questions around the retirement goals of a client go a long way to monetising every aspect of their later years, and it is imperative that these goals are included in the financial plan.
Ask about hobbies, travel, grandkids’ education, living expenses, food, wine, golf and everything else that will make up the lives of your retiring clients. Then show them how long their money will last. Show them in a picture format and ask them what they think.
Building a buffer
We plan to a retirement age of 100 because we think it makes sense, people are living longer and we need to build in a buffer. If your client’s money is falling short of that, then you need to discuss the possible ways of making it last longer which may include saving more, spending less, working a little longer or taking more risks.
Optimising their existing portfolios generally costs your clients nothing, and will contribute positively to their retirement plans. Then start looking at all the various actions that they could take, considering some of the more complicated decisions like commutations, disposals and drawdowns. Illustrating how each action affects the life of their money works for clients. Make these decisions with the client and continue asking a lot of questions, like “Do you think you would need such a big house?” or “Could you go overseas once a year instead of twice?”
Reeling them in
This line of questioning brings the client closer toward you because you are planning together rather than advising, and he is more likely to buy into the plan because it is his and he helped come up with it. Through your discussion, consider the client’s ongoing net asset value and liquidity pictures because the one reflects longevity and the other cash flow.
When you reach a conclusion, show your client the planned picture and compare it to the current picture to demonstrate the success of having thought strategically and practically about how he can plan for his desired retirement.
Financial planners do a fair amount of work in the background, but the client experience should be simple and uncomplicated. There is so much marketing and product noise in an industry that is still trying hard to professionalise itself and clients are confused. They seek good financial planners that speak to their needs and do the right thing in the right way. Listen to what the client has to say and act accordingly.
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