Helping Your Clients Get the Most Out Of Their Money

Kim Potgieter

Director, Chartered Wealth Solutions and Managing Director, The Financial Life Planning Institute, South Africa

It is not the money in your life but rather the life in your money that counts in retirement.

For years, financial planners have bombarded retirees with retirement calculators, graphs, and tables with the implication that if you have X amount in the bank upon retirement you will be okay. What this approach fails to take into account is that retirement anxiety has as much to do with emotional issues as financial ones.

While it would be naïve to say that money is not important in your retirement, it is the Return on Life that you get out of your money that will determine whether you have a happy retirement or not.

For this reason, forward-thinking planners and advisors are starting to incorporate life-coaching techniques into their planning sessions. However, unlike ordinary life coaches, financial life planners have the advantage of knowing exactly how much money a client has available, and can therefore make lifestyle suggestions based on financial reality rather than wishful thinking.

While money itself is a quantifiable object, each and every person has a different, personal relationship with their money, and it is this unconscious, qualitative relationship that often dictates our financial behaviour. Some of my clients are part of the “silent generation.” They grew up in a post-WWII world, where “waste not, want not” was a way of life, and frugality was a necessity. These same clients now may have more than enough saved for their retirement yet they conduct their lives as if they are living pay check to pay check.

At the start of any financial planning process, I often recommend that clients first examine their history with money. This exercise can be very helpful in identifying which money issues from your past are shaping your financial attitudes and behaviour today.

Questions I suggest clients consider include:

• How did your parents handle money? What disagreements did they have?
• Did your family have significant financial reversals or good fortune during your childhood? Were you richer or poorer than your friends?
• How do you handle money in comparison to your siblings? Why?
• Could you talk about money with your parents when you were a child? How about now?
• What's your most significant memory about money?
• Did your mother choose (or have to) work?
• Did you go to work at a young age?
• Did you ever steal from your parents' wallets or the store?
• Did your mother hide things she bought because she was afraid of your father's anger (or vice versa)?
• How did you pay for your college education?
• Did you parents teach you how to handle money?

Answering these questions honestly will help your clients pinpoint what money habits they have that can be traced back to their childhood. They then need to ask themselves if these habits are beneficial to them. If not, they can begin to make conscious changes in their life and move forward.

Lynne Twist, in her book The Soul of Money sums it up perfectly when she says, “Money itself isn’t the problem. Money itself isn’t bad or good. Money itself doesn’t have power or not have power. It is our interpretation of money, our interaction with it, where the real mischief is and where we find the real opportunity for self-discovery and personal transformation.” 

It is your job as a financial advisor to help your clients explore their deeper relationships with money and to assist them in making whatever money they do have work to create the best life possible. Let’s take a look at a couple of case studies from my files:

Case Study 1

A 72-year old man came to see me. He had close to $4 million invested but was not happy. He had been roped in to act as his grandchildren’s au-pair in the afternoon because his daughter was working full-time in a job she hated. He wanted to take his family to the Seychelles for a holiday but did not think he could afford to do so. Using a basic calculation, I was able to clearly show him that he had more than enough money to live on. I suggested that he financially assist his daughter whose dream was to start a nursery school from home. This would mean she could give up her full-time job and replace it with a new part-time job of being a nursery school teacher. This would not only be more personally satisfying for her but it would mean she would be able to take over looking after the children in the afternoon and this would free him up to play all the golf he wanted. I also suggested that he take $24,000 out of his investment to take his family to the Seychelles. The real eye-opener for him was that even when we factored in these withdrawals, his portfolio value hardly changed. Yet, by making these changes, his Return on Life––and that of his family––would be made immeasurably richer. 

Case Study 2

A retired couple came to me for financial planning advice. Their large home was paid for and they had substantial savings, yet the wife was bitterly unhappy and on anti-depressants. Her daughter had moved to Cape Town and was working full-time with no support structure. My client was worried that her grandchildren were left alone in the afternoon. I suggested that they put their house on the market and, while they were waiting for a buyer, move to Cape Town and rent a small place there. From a strictly financial point of view this may not look as if it made sense, but the money it would take to rent something in Cape Town was money well spent in terms of quality of life for my clients.

Too many people equate retirement planning with financial planning. While the financial aspect is important,  planning for a successful retirement needs to focus more on doing some introspective thinking about how your clients are going to handle the personal challenges that come with retirement.

Questions Your Clients Need To Answer Before They Retire

Here are some basic exploratory questions that your clients should be able to answer as part of the retirement planning process. Similar questions can also be found on Mitch Anthony’s website, www.newretirementality.com:

• What do you want your life to look like in retirement? 
• Who will be an important part of your journey? 
• How will you get the most out of each and every day? 
• What will you miss most about your job, and how do you plan to replace them? For example, if you will miss the social interaction that work brings, you need to ensure that you join a club or perhaps find part-time work that will guarantee you a certain level of social interaction. If your work provided you with a sense of purpose, then volunteering in retirement may be the answer.

It would be unrealistic to say that financial planning is not an important part of retirement planning. However, you and your clients can’t realistically plan financially unless you both have a vision for what they want to accomplish. Only then is it possible to devise a financial plan that can make these dreams come true.

©Kim Potgieter

Kim is a qualified financial planner, as well as a registered life planner. Armed with a Clinical and Industrial Psychology degree, Kim has a keen interest in the relationship between psychology and money. She is fascinated in the relationship people have with money, and is passionate about inspiring retirees to live with purpose. Kim believes that to have the most fulfilling retirement possible, you have to see it as an exciting journey filled with opportunities. Her favorite question to ask is, “Are you getting the most life out of your money?”

Contact Kim at www.charteredwealth.co.za.