Financial planners often have to manage their client’s expectations.
It’s almost as hard to do as changing your client’s behaviour.
We can recall meeting a second-marriage middle level manager, on $100,000 a year. His new wife worked part time in a bayside Melbourne frock shop, on commission, for about $20,000 a year.
They were financially ambitious. They wanted to build a new home, put three kids through university, travel overseas every year as a family and retire early with the same standard of living as they enjoyed before they retired. Or better. They were so ambitious. They wanted it all.
The only problem is they were not prepared to change. At all.
This is a hard gig to handle.
The client’s expectations are (almost outrageously) excessive, and have to be gently managed and coaxed back to reality. It’s not easy, and you stand a good chance of never seeing your client again when they realise you do not have a magic wand. Not even their adviser can make a silk purse out of a sow’s ear.
The maths just don’t add up.
Financial advisers are not the only people who have to manage client expectations. Click here to see how lawyers do it.
The best approach here is, as usual, get your clients talking.
Let your clients explore the reality of their dreams. Ask each of them careful questions. It may be the first time they have discussed the issues sensibly as a couple, so sit back and let them take the lead.
Let your clients discover the reality that they cannot afford it all. And compromises are needed.
Try the shandy approach. Obviously the full strength ambitions cannot be achieved. But can they be shandied down to something acceptable? Can there be a workable compromise that helps that newly blended family become happier?
Quietly throw in some sensible alternatives. Use carefully crafted questions pitched to encompass your clients’ goals but with a more realistic tone.
Is it smart to pay stamp duty, solicitors and all the rest for a new-beaut, bigger and better home, with five bedrooms, when the kids will all be gone soon? What about just building a new family room on to your existing home? Make the loan interest-only and worry about the principal repayments when the kids are gone (ie in five years’ time).
What about mum working an extra day a week, and earmarking the extra money to one long awaited European holiday in three years’ time? This could be more realistic than running up an expensive credit card debt (aka “a cause of frequent quarrels and several marriage breakdowns”) holidaying overseas once a year, every year.
What about retiring a bit later, rather than a bit sooner, and changing the work role so you enjoy it more? After all, it’s not really work if you enjoy it. This will help you afford the family extras now, and make your ultimate retirement more pleasant too.
Gently let your clients see their original goals are not realistic. Shandy things down, so they taste the same but do not cost as much, and become achievable.