Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
How do I get through to clients who spend too much money?
I can’t imagine we are the only advisor that deals with this. These are often people who have saved a lot but not enough to allow them to spend frivolously with no regard for their other goals. As one example, we have a client who wants to be able to retire at 50, a reasonable goal for someone who is late 30s and making several hundred thousands of dollars a year, but is spending most all of it. We have shown him the plan for what he needs to save to reach his goal, but he and his wife have expensive tastes.
We have another couple who were on track for early retirement and then decided they wanted to support their daughter in her quest to start her own business. They are funding the entire thing, which will leave them with very little in savings for their retirement objectives. I have laid out their objectives, reminded them of what they have said they desire and put together very clear projections on how quickly the money will run out if they keep at the current levels. It falls on deaf ears – they say, “yes we understand.” But then the next thing I know we are getting requests for redemptions. It’s their money but I don’t want us to be accused of abdicating our fiduciary standard because we aren’t keeping them on the track they laid out in the first place.
What should we be doing and how do other advisors deal with this?
Doug S.
Dear Doug,
What discussions are you having with them? Your approach in having these discussions could make the difference. For example, you say you are reminding them of what they have said, and how their current behavior will not allow them to reach their goals. But what if their goals have changed? People do evolve and change throughout their lives and it is possible your clients now have other priorities. In addition, life is about trade-offs, so maybe instead of showing them the error of their ways, you could construct a couple of scenarios and let them choose which one is most appealing to them.
I hear this issue from advisors all of the time. It’s in the category of dealing with difficult clients because of the fear that they won’t listen, but then will blame you when they don’t get everything they want.
Communicating is important and it sounds like you are doing this. If you aren’t having goals-based discussions on an annual basis, make sure you are incorporating this. Instead of just taking whatever goals the client laid out in the beginning of your relationship and assuming that’s the Holy Grail for the client, talk to them about their emotions, life changes, what matters and what doesn’t. Have some deeper discussions with them about their values, and what’s most important.
Many people say they want to retire early, and many mean it and do it, but there are also others to whom the goal sounds good, but then the reality might not be so appealing. What will they do in retirement? How will they spend their time? What will they find fulfilling? Instead of just focusing on the end goal – in both cases here, retirement, focus on the meaning of retirement to them. If you can unearth emotional and values-based components to what the clients want to accomplish, it would give you a very different perspective and basis for having these discussions.
Remember, too, that when people resist something, it’s often coming from a fear-based mindset. Do the clients who are spending too much worry they are going to “miss out” on something important in life if they don’t keep up their expensive lifestyle? Does the couple funding their daughter’s business fear they will lose her love if they don’t do so? I know this sounds deep, but these are the emotional conditions that cause people to make decisions that aren’t always in their best interest. While you don’t want to play psychologist, you certainly could probe these decisions and behaviors and try and uncover a bit more about the thinking (and feelings) behind them.
I encourage other advisors to write in on this topic and share their experiences too.
Dear Bev,
We spent a lot of money on our website recently and have received some negative comments from our clients. They don’t think it reflects who we are and what we do and one even said he was hesitant to send a referral he knew well because the site was so “old fashioned.” What do we do? Jettison the whole thing and start over? Let clients have their opinions but make them suck it up because this is what we have?
Kelly M.
Dear Kelly,
I do wish you’d have included your URL so I could see your site and render an opinion! Your experience is one of the reasons I’m a big proponent of including clients (and centers-of-influence) in any marketing update, whether it be enhancing your value proposition or redoing marketing materials. Clients have a perceived idea of who you are, what you do and how you help them and gaining their insights can be important in the process whether you do this via interviews, or a group meeting.
The “old fashioned” comment could pertain to intergenerational appeal. Advisors need to consider the different audiences they are trying to reach when developing messaging and look and feel. A story about deep roots and lots of history might be great for one audience, but sound stodgy and dry to a younger generation.
In my experience, websites don’t often need a total overhaul. Instead of thinking about throwing it all out, solicit some direct feedback from the clients about what – exactly – they like or don’t like about it. Perhaps it’s a matter of changing a picture or two, or changing some of the wording. Maybe you need to speak more directly to the audience and be clearer about where and how you add value.
The good news is that your clients care enough to be connected to what you are doing such that they feel an allegiance to your site and your work. Probe more deeply with them to get additional information and then decide whether you want to make additional changes.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. In 2008, she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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