Richard Rosso is senior financial adviser at Clarity Financial LLC in Houston. Voices is an occasional feature of edited excerpts in which wealth managers address issues of interest to the advisory community.
A client’s mental transition to retirement can pose a unique challenge. Regardless of how thoroughly he or she may have worked with an adviser to lay the proper financial groundwork, it can be difficult to make the move to a more open schedule and suddenly switch between the saving and spending mindsets. Advisers must therefore be sensitive to this transition and adopt an approach that guides new retirees through the challenges they may face.
A common fear among new retirees is that they will end up spending far too little or too much of their savings. You should try to impress on them that there is no such thing as a “perfect” retirement plan given the number of unknowns that come into play.
Rather than letting this reality discourage your clients, use it to demonstrate the importance of being able to adjust their plan as needed, according to changes in their life or health circumstances. New retiree clients will feel better about their future by viewing their retirement plan not as one narrow road, but rather as a multi-lane highway where they can shift into a faster or slower lane (a higher or lower rate of income) depending on their needs.
Emphasizing that flexibility, try to move clients’ focus away from money and numbers and toward the activities that will keep them occupied in retirement. Ask your clients what new project or hobby they will put their time into. Have them envision what their social life will look like and how they will develop and maintain it. By asking qualitative questions such as these, you can lead your clients to a positive mindset that is less concerned with figures and income and more concerned with how that income can be used to support the lifestyle they want.
Another way advisers can help new retirees’ mindset is by structuring their finances to mirror the steady, incremental income to which they likely were accustomed during their working years. It can be overwhelming for clients to enter retirement and suddenly find themselves managing a very large sum of accumulated assets. As a result, many retirees will benefit if advisers help establish a system of income that resembles the regular paycheck.
In general, advisers should aim to take an upbeat and empathetic tone with newly retired clients. A serious, numbers-based approach isn’t likely to ease the emotional strain felt by individuals navigating this profound life change. So trade a dry line (“You have a high probability of meeting your plan”) for a more inspirational one (“You have the foundation for a secure and active lifestyle”).
An approach to retirement transitioning that’s based on emotional support is how advisers can best serve these clients. And it’s how we can position ourselves as lifelong financial experts to them.
Richard Rosso, MS, CFP, CIMA
Richard Rosso is the Head of Financial Planning for Clarity Financial. He is also a contributing editor to the “Real Investment Advice” website and published author of “Random Thoughts Of A Money Muse.” Follow Richard on Twitter.