Practical Advisory Steps for clients or Prospects Who Want to Accumulate Funds for Retirement

By David Greene | March 9, 2012

In a series of articles, we will provide you with some practical guidance when working with clients or prospects who are still years from retirement and want to accumulate sufficient capital that will provide the income they require to realize financial independence. We refer to these people as in the “Accumulation Lifecycle Phase,” as opposed to clients who have reached the phase where they are about to retire or have already retired. When a client or prospect is in one of these three phases, the priority of issues and concerns that the advisor needs to address will differ.

There are six common retirement issues that must be addressed for virtually all people that we talk to about retirement planning who are in the Accumulation Phase:

Insufficient Saving for Retirement – The Need for a Plan
Insufficient Saving for Retirement – Balancing Current Family Needs with Future Retirement Needs
Inefficient Use of Retirement Planning Savings Vehicles
Improperly Structured Portfolios
Poor Management of Risks Associated with Unexpected Events
Failure to Effectively Evaluate Investment Performance

We will address these issues one at a time starting with the need for all those wanting to realize financial independence to develop a plan to do so.

Issue #1: Insufficient Savings for Retirement – The Need for a Plan

The most common problem we encounter with people in the Accumulation Phase is that they fail to develop clear and actionable goals.

This allows them to be complacent about their current level of savings, oblivious to how seriously they are jeopardizing their future security by saving too little. Even when they have made some effort to plan, their planning tends to lack specificity; they tend to make superficial estimates of their retirement income needs and live their lives in the (mistaken) belief that their retirement savings will be adequate.

Motivating Clients to Plan

Recognizing the importance of having a realistic plan and the overwhelming number of individuals who lack one, financial professionals must be well prepared to uncover this potential need and create a sense of urgency to act. Below are examples of effective questions that will help you accomplish this objective:

“How did your last advisor work with you to establish clearly-defined goals regarding your future financial independence?”

“How has your past advisor worked with you to determine that your current level of saving is appropriate for how you wish to live in retirement?”

“How did your previous advisor measure your progress toward your retirement income goals based on your current assets, liabilities and potential income sources in the future?”

“How has your advisor helped you define how much you need to save for retirement?”

The Solution to Insufficient Retirement Savings – Developing a Retirement Plan

The following key action points provide guidance to help a client or prospect begin to address insufficient savings for retirement:

Get clients or prospects to describe their retirement as clearly and in as much detail as possible. Listen to and understand the emotional issues as well as the factual issues.
Identify the capital needed for retirement and a saving strategy to achieve it. This allows you to develop a saving/investment strategy that determines how, how much, where, and why a specified amount of dollars need to be saved on a regularly scheduled basis.
Consider illustrating a very clear picture of where they will end up down the road with their current plan of action versus a new plan that starts now versus later.
Diligently explore potential retirement savings/income resources that clients often overlook.
Make sure your client is aware of the leverage involved in deductible contributions and/or employer matching of contributions.

“Awareness is Everything.” When we help a client create a clear picture of where they want to go and a specific plan to get there, they are much more likely to arrive safe and sound.

“For those who wish to learn more about critical issues in retirement planning, check out Greene Consulting’s Retirement Planning Program.” Click to learn more.