Financial Security or Financial Maturity?

$7.5 Million.  According to a recent survey by Fidelity Investments that’s the number it would take to make the average American millionaire feel wealthy. Considering less than 2% of the population has even $1 million in assets, how can we feel secure when we fall short of our own expectations?  The answer may be to start by creating financial maturity.

To many people, financial security is defined as freedom from worry. It’s a state of being so confident in your financial situation that you no longer worry about whether you’ll have “enough.” But psychologists tell us confidence has two elements – a mathematical element and an emotional element.  Every day, financial planners across the country utilize a plethora of tools to help minimize the mathematical risks and increase our confidence that the financial plans we create will succeed.

But regardless of how high we boost the mathematical confidence, it’s the emotional element that is so often missing.  Regardless of how much money we have, many of us often feel we need just a little bit more to really feel comfortable.  In fact, studies show it doesn’t matter if a person has $500,000 or $5 million, the typical retiree feels they need approximately 25% – 30% more than what they currently have to really “feel” secure.  It’s like the old riddle that asks if a grasshopper jumps half way to a finish line with each jump, how many jumps will it take to reach the line?  The answer of course, is infinite.  If he only jumps half way each time, he’ll never get there.  Many of us are a lot like that grasshopper – the math can only take us so far.  Eventually we need to take that last emotional leap.

What prevents us from making that final leap?  For many the missing ingredient is what I call financial maturity – understanding our own attitudes and beliefs about money. Many of us are pre-set with negative attitudes or beliefs learned in childhood that we no longer even consciously recognize we continue to hold onto today. These may include attitudes of scarcity, generosity, values or self-worth that erode the confidence we feel in our financial plans.

For all of us, examining the source of our attitudes and beliefs around money allows us to discard those that no longer serve our purpose.  It then allows us to create a new set of attitudes and beliefs that are aligned with our values and priorities. By aligning our attitudes, beliefs and actions around money with our personal values and priorities, we can close that emotional gap that prevents us from feeling totally secure.


Posted in Uncategorized | Leave a comment

Is the Doctor In?

“Sometimes my clients expect me to be psychologist, career counselor, therapist AND financial advisor!” one of my advisor coaching clients recently lamented. It’s a sentiment to which many of us can relate.  When that happens, the key is to remember that asking the right questions is as important, takes as much skill and provides as much benefit as providing the right answers.

As financial advisors, a large part of the value proposition we bring to our clients is our knowledge and expertise.  But we’ve all been in situations where a client lays at our feet an issue to which there is no financial solution.  In fact, there are many issues that our clients – indeed all of us – face every day to which there are no external answers.  No one can tell you if leaving your spouse, quitting your job or moving to Paris to follow your dream is the right thing to do. Each of us has to find those answers within ourselves.  There’s nothing in Financial Advisor 101 that prepares us to help clients with these issues.  And yet, as trusted and respected advisors, clients often look to us for guidance. Successfully handling those situations requires us to recognize two things:  First, our role changes, and second, a different skill set is required to preserve and strengthen the client relationship.

Because of our expertise, most of us are very comfortable in the role of expert solution provider. It’s very easy (some would say particularly for men…) to slip into the role of overall problem solver.  As long as the problems remain within the financial arena, we’re good to go.  But when the problem involves personal or emotional struggles, we suddenly find ourselves way outside of our comfort zone.  We assume the client still expects an answer because that’s how we view our role.  What we need to recognize is that in those situations, our role changes.  Rather than being the trusted financial advisor who has all the answers, your role now becomes that of the compassionate, empathetic and trusted personal advisor who asks all the right questions.  We need to resist the impulse to offer solutions, and instead ask insightful, thought-provoking questions that allow the client to view the problem from a different angle and find the answers for themselves.

But as Robert Half once said, “Asking the right questions takes as much skill as providing the right answers.”  How can we learn to ask the right questions?  One of the best places may be the life coaching industry.  Now I’m not suggesting that we all run out and become life coaches, but when it comes to asking thoughtful questions that spark insight and build relationships (without stepping into the world of therapy or counseling) they have a few techniques from which we might be able to learn.

Marcia Bench, founder of the Career Coach Institute, teaches her students to utilize three distinct “levels” of questions that illicit three different levels of responses.  Level one – the level at which most financial advisors interview – are the most basic ‘what-oriented’ questions that focus primarily on identifying specific problems.   These include questions like ‘When do you want to retire?’ or “How much income will you need?’  Level two questions are the ‘why-oriented’ questions that delve into the underlying beliefs and motivators that drive behavior.  These include questions such as ‘What’s important to you about retiring at that age?’ or ‘What do you value most about x?’ (being retired, your job, your free time, your spouse, etc.)  Level three questions are those that cause the client to examine or begin to change his or her deepest – and sometimes most limiting – beliefs about themselves.  These include questions like ‘If you did x, what would that say about you?  If you did not do x, what would that say about you?  Do you really believe either of those to be true?’

Especially in an environment when clients are resetting their retirement expectations and reassessing their priorities, theses kinds of questions help clients clarify their goals and create stronger commitment to any particular course of action.  In the meantime, they also position you as the enlightened and astute personal advisor, resulting in stronger relationships and increased loyalty.   Will our profession soon require training in counseling or therapy?  It’s doubtful.  But I am reminded of the old stereotype that psychologists do nothing more than turn your questions to  them back around to you. If you think about it, there might just be a reason for it.

Posted in Uncategorized | Leave a comment

Financial Planning’s “Crazy Uncle Charlie”

We’ve all got one – a “Crazy Uncle Charlie.”  He’s the family member who’s just a little bit odd, the black sheep who tends to break from the family and might disappear for years at a time.  After they’re gone we shake our heads sadly believing that “Charlie” (insert the name of your crazy relative here) has wasted his or her life.  But sometimes we’re surprised to discover that Charlie experienced more success, created more change and influenced more people than we ever thought possible.  We within the financial planning community had just such a “Charlie” in our family.  His name was Thomas Leonard.

Leonard was a financial planner who in the 1980’s realized that many of his most successful clients needed something more from him than just financial guidance and investment recommendations.  They needed help translating their financial success into personal satisfaction and fulfillment.  As such Leonard began to “coach” his clients in what he originally called life planning.  Over time, as he saw the impact his coaching was having on his client’s lives, he began to train others on the techniques he was using.

By the early 1990’s Leonard’s career had gradually shifted away from financial planning to full-time coach training, which he dubbed Coach University.  Coach U as it is now called, was the first – and is now considered one of the premier – life coach training organizations in the world.  Leonard was also instrumental in the formation of the International Coach Federation, the leading self-regulatory organization that oversees the coaching industry.  Today Leonard, a former financial planner, is considered by many to be the father of the modern Life Coaching industry.

While many of us tend to dismiss “life coaching” as something less than a legitimate profession, the parallels to our own financial planning industry are intriguing.  First, the value proposition of both industries are remarkably similar – to help clients achieve their goals.  Second, both industries continue to struggle to define who they are and what they do.  Each offers a variety of sometimes competing credentials that often end up confusing consumers.  In that respect the life coaching industry is likely 25 years behind the financial planning industry, but I need do no more than mention the word ‘fiduciary’ to make the point.

Finally – and forgive me for expressing this one – the quality of practitioners varies widely.  Many of us tend to believe these “coaches” are hardly qualified to deliver on the promise they present. I have been fortunate enough over the last few years to meet several coaches who come from backgrounds in psychology, counseling or other fields who are truly skilled in the coaching process and in helping clients overcome perceived obstacles to achieve their personal goals.  At the same time I have also encountered a number of financial advisors over the years who – how shall I say it – failed to inspire a great deal of confidence.

So why should we care?  Because the life coach industry is exploding and many of these coaches are directly competing for the role of “trusted advisor” that you want to play in your client’s lives   The ICF has over 18,000 members with an estimated four times that many non-member individuals practicing some form of life, career, retirement or other coaching specialty.  With the well-known baby boom retirement wave now cresting, several coach training programs are specifically teaching emerging coaches how to address non-financial retirement issues.  Certainly they cannot compete in the financial arena, but as Leonard discovered and the continual redefinition of retirement today clearly demonstrates, our clients are seeking more than just financial guidance.  If they don’t receive that guidance from you, they will seek it elsewhere, thereby cracking the door just enough for someone else to supplant you as your client’s most influential advisor.

So what can you do? Like any service you can either outsource the service to a qualified partner (i.e. create a referral relationship with a coach to send your clients to) or develop the skills in-house.  Recognizing that the entire coaching industry was born out of the kinds of conversations we have with clients every day, integrating some of these coaching techniques into your client conversations is actually quite easy. In fact, there is much the life coaching industry can teach us about asking the right questions and deepening our client relationships.  Does that mean you have to turn into a life coach?  Not at all.  What it does mean is that you move from being the client’s trusted financial advisor to being the client’s trusted personal advisor – a role with exponentially more value.  In coming blogs I’ll share with you some techniques from the coaching industry you can use to engage your clients in conversations that move you beyond just being a financial advisor, to becoming your client’s trusted personal advisor.

Posted in Uncategorized | Leave a comment

Find an Advisor Who Focuses Beyond the Financials

Rocker David Lee Roth once said, “Money can’t buy you happiness, but it can buy you a yacht big enough to pull up right alongside it.”  Over the past year a number of studies have been released that may prove the former Van Halen front man just might – up to a point – be right.

Most noteworthy is a study released last year from Princeton University’s Woodrow Wilson School which claims that up to a point, increased income can indeed make an individual happier.  The authors of the Princeton study analyzed the responses of 450,000 Americans polled by Gallup and Healthways in 2008 – 2009 and concluded that for individuals with incomes of less than $75,000 per year, an increase in income did lead to improved day-to-day happiness. Above $75,000 however, the correlation between increased income and improved daily happiness went away.

The study doesn’t say why $75,000 is the benchmark, but the authors say it’s “plausible” that this is the number at which most people’s basic needs are met and money for day-to-day expenses is no longer an issue.  At that point, other factors such as family and social relationships, engaging in a meaningful purpose or gathering fulfilling life experiences may have more impact.

A survey of affluent clients by Merrill Lynch early last year seems to support that finding.  In early 2010, 51% of Merrill’s affluent retired clients responded that they wished they had spent more time focusing on their life goals, not just their financial goals, when preparing for retirement.

While $75,000 is by no means a hard and fast number, the idea that there is some number that represents a comfort zone to each of us is intriguing.  If we’re below that number, we’re more concerned with how we can save more, invest better, or even improve our skills to go out and get a better a job that will help us reach that number.   Just as psychologist Abraham Maslow’s hierarchy of human development is built on fulfilling our basic needs, our investment and personal development goals will be focused on building and creating this foundational income.

For those who have incomes above their personal comfort zone number, the focus changes away from investments and income planning.  Undoubtedly these things are still important and we want to know they are taken care of at that level, but once that assurance is received, our attention turns toward finding happiness and fulfillment in life’s other key arenas.  What are our most heartfelt dreams and true life goals?  What is it that provides us with a sense of passion and purpose?  Finding an advisor who is willing to have that conversation with you is more than just a trusted financial advisor, they become our trusted personal advisor.

Posted in Uncategorized | Leave a comment

Which Version of Retirement Are You In?

Every few years we begin to see headlines proclaiming the latest “New Retirement.”  I have to admit there have been so many versions over the past 20 years that I sometimes get confused as to whether they’re talking about the “new retirement,” the “new, new retirement,” or the “newest, new retirement.”  In fact, it’s become so confusing that I’ve begun to label the various versions of retirement numerically, like software releases.   Do you know which version you’re in?

Retirement 1.0 – The “Original” version of retirement was created when FDR signed the Social Security Act in 1935 and extended into mid-1950’s.  During this time retirement wasn’t viewed as something to celebrate, but rather as the somewhat public recognition that as a worker, one had very little left to contribute to society.  With the full retirement age set at 65 but life expectancies (at birth) averaging 62, retirement was viewed as having one foot already in the grave.

Retirement 2.0 – As life expectancies increased into the 1960’s and ‘70’s, Retirement 2.0 became known as the “Rocking Chair Retirement.”  Entering retirement with somewhat better health than their parents at the same age and on average living just a few years longer, retirees in the 1960’s and 70’s had more to give but little opportunity to do so.  Social attitudes and age discrimination still left many retirees of this era relegated to the sidelines with little to do but pass the time.

Retirement 3.0 – Thanks to better health, “The Golden Girls” and a lifetime of contributing through FICA taxes to someone else’s future financial security, retirement in the 1980’s and ‘90’s began to be viewed as a “20-30 Year Vacation.”  The mantra of the age changed from “He who dies with the most, wins!” to “He who retires first, wins!”  Early retirement became a sign of career and financial success.  These became the golden years where your only objective was to enjoy the luxuries and benefits of a lifetime of hard work.  As such, retirement began to be divided into phases:

Retirement 3.1 – “The Go-Go Years”  The early years of retirement where you could travel, take cruises and do all the things you had always wanted to do.

Retirement 3.2 – “The Slow-Go Years”  Over time the thrill of traveling to exotic locations was replaced by the desire to spend time with children and grandchildren, friends, and to create and leave a legacy.

Retirement 3.3 – “The No-Go Years”  With the rise in Alzheimer’s and other physical ailments, concerns over health care and assisted living arose along with an aging population.

Retirement 4.0 – By the early 2000’s, 60 had become the new 50, and people were “retiring” from their primary careers with more gas in the tank and a strong desire to give back and continue to contribute in a personally meaningful way.  Certainly the idea of taking that dream vacation still exists, but it’s not enough. Retirees no longer (as if they ever did) want to sit in a rocking chair or waste their talents on endless rounds of golf.  Retirement became a second chance to follow your passion and finally do what you had always wanted to do.  Phrases like “second act” and “encore career” came into the social vocabulary as the ideal for those who had the financial means to pursue their dreams.

Retirement 5.0 – But with the “Great Recession” of 2008-2009, many people lost the financial means to pursue their second act.  Rather than retiring at age 55, 60 or 65 as planned, many 50-65 year-olds are recognizing the need to work longer to create the retirement they envision.  The desire to give back and pursue a personal purpose has not lessened however, leading many people to rethink the retirement goal.  Rather than spend 10-20 more years in jobs they’ve grown tired of, many Baby Boomers and even Gen X’ers are re-tooling, re-training and reinventing themselves to enter careers they truly enjoy with the idea of working those careers well past “normal” retirement age.

If you’re already retired, you probably recognize yourself somewhere between versions 3.0 and 4.0.  If you’ve not yet retired, you might be looking at versions 4.0 or 5.0.  In either case, recognizing where you’re at and what your expectations are can go a long way toward setting a realistic plan to reach the retirement you want and achieving your most important life goals.

Posted in Uncategorized | Leave a comment

Are You Prepared for the New “Pretirement” Conversation?

At the 2005 FPA Conference in San Diego, J. Peter Lindquist, author of Solving the Retirement Puzzle, was the first to introduce the financial planning community to the concept of “pretirement.” Originally, Lindquist described pretirement as a new life phase primarily for the newly retired, those in their late 50’s or early 60’s who had achieved a certain level of financial independence but were nowhere near emotionally ready to be relegated to the sidelines of life.  Lindquist suggested that these folks may not need to earn an income, but they do feel a strong emotional need to give back and contribute in a personally meaningful way.  Pretirement, as Lindquist described it, was for those who were somewhere “between the rat race and the rocking chair.”

But over the last few years, the concept of pretirement – if not the name itself – has begun to take hold among a much broader – and younger – group of people.  For a variety of reasons ranging from recognition of one’s mortality to disillusionment over ever reaching the retirement dream, more and more baby boomers and even Gen X’ers are redefining the course of their lives from the typical three life-stage path of education, career and retirement, to include a fourth stage – pretirement – as the beginning point for the second act of their lives.

Of utmost importance to these “pretirees” is the ability to create lives of meaning, balance and purpose without what they feel is indentured servitude to a company or job that consumes all their energy and leaves little room for anything else in their lives. Having chosen careers that offered the promise of financial security, many middle and second-half baby boomers are becoming more and more disillusioned feeling that they’ve spent a significant portion of their lives in pursuit of a retirement goal that continues to slip further from their grasp.

Even Gen X’ers are beginning to doubt the retirement promise and are adopting a “life is a journey” attitude by re-tooling themselves into careers that are more personally satisfying. (For proof, just visit The difference for this younger group of pretirees is that financial independence is no longer viewed as a prerequisite to the primary driver of being able to engage in a personally meaningful and fulfilling pursuit.

For the financial services community, this trend is more than an interesting footnote – it’s a wake-up call to the kinds of conversations clients will be demanding more of in the future.  While financially secure leading edge baby boomers are demanding more creative and secure income distribution strategies that will allow them to pursue that purpose without worry, second-half boomers and Gen X’ers are seeking help to examine how they can arrange their finances in such a way that will allow them to pursue their personal purpose without waiting to retire. And while parts of that conversation are sure to include topics like budgeting, portfolio design and income distribution, other parts are likely to include conversations ranging from values, priorities and life goals to career direction, extending one’s retirement date and life purpose. In the very near future, successful financial advisors will be more than just a trusted financial advisor, they will become trusted personal advisors able to assist clients with a variety of life issues, not just financial issues.

Posted in Uncategorized | Leave a comment

Engaged Clients Provide More Referrals

As Mike Byrnes reports here, engaged clients provide more referrals than complacent or content clients.  The question is how do you get them engaged? The answer is in the questions you ask.

According to Marcia Bench, author of Career Coaching, An Insider’s Guide, professional life, career and retirement coaches are taught about three different levels of questions that coaches can ask their clients.  Level 1 questions are the what-oriented questions that simply try to determine the facts.  Level 2 questions are the why-oriented questions that attempt to uncover the clients attitudes and beliefs.  Level 3 questions – usually beyond the scope of most sales professionals, attempt to help clients change their beliefs about themselves.

While most financial advisors are very good at asking the level 1 questions, very few are truly comfortable asking the level 2 questions or digging deeper beneath the first response that a level 2 question creates.  To create more engaged clients, you’ve got to become comfortable asking more level 2 oriented questions and digging deeper to uncover the true motivators behind the clients actions.   For most clients who feel their advisors take little interest in them beyond their money, showing an interest in their hopes, dreams, attitudes and beliefs is the way to create ever-greater loyalty and engagement.

And as the proof that Mr. Byrnes reports on continues to demonstrate, engaged clients make for profitable practices.

Posted in Uncategorized | Leave a comment

Younger Boomers Concerned About Retirement

A new survey by Allianz Life Insurance Company of America, released today shows that younger baby boomers are more concerned than ever about their retirement.  While some may find that to be new news, second-half boomers (aka – “Generation Jones”) themselves will say they’ve been feeling the pressure for years.

One contributing factor to the newsworthiness of this survey is the fact that up until very recently, second-half boomers have been treated purely as an extension of the leading edge boomers.  It’s been long assumed that the same hopes, challenges, fears and frustrations of leading edge boomers were shared by second-half boomers.  The reality is that the fears are different.  Far fewer second-half boomers have an employer sponsored defined benefit pension plan, there is more uncertainty around social security, and for the most part, second-half boomers have far smaller retirement account balances set aside.  While many leading edge boomers are embarking on “encore” second careers to find the fulfillment they missed during their primary working career, most second-half boomers are resigning themselves to the need to continue working into their 70’s just to be able to support themselves.

With job satisfaction (according to the Conference Board) at an all-time low, second-half boomers are struggling to reconcile the promise of the retirement dream with the economic reality of today.

The fact is, second-half boomers need to rethink their approach to retirement.  Rather than spending their entire adult lives pursuing a retirement dream, second-half boomers need to learn the lessons taught to and embraced by the younger Gen X and Gen Y generations:  Pursue your passions.

Too many second-half boomers still look at retirement as the finish line to a long and arduous career.  But what leading edge boomers have long realized and subsequently taught to their Gen X and Gen Y children, is that the old cliche is true:  It really is about the journey, not the destination.  Now that the destination of retirement (i.e. – the age at which we can reasonably expect to achieve the retirement dream) has been stretched out into our late 60’s or early 70’s, second-half baby boomers still have both time and opportunity to re-tool themselves to careers that provide fulfillment while still earning a living.

For millions upon millions of second-half boomers, finding work you love and can do well into your 70’s may very well be the key to not only a successful retirement, but a successful life.

Posted in Uncategorized | Leave a comment

Underfunded Retirements – No Kidding?!

Yesterday I ran across another article (here) bemoaning the underfunded state of retirement savings for millions of baby boomers.  Truthfully, I think most of us know the state we’re in and equally, most of us really only care about our own retirement readiness.

The fact is however, that as we age ever more gracefully and continue to lead longer and fuller lives, every aspect of our lives is being pushed further and further out while the normal accepted retirement age remains fixed at 65.  Millenials today are taking longer to become financially independent from their parents, get married and settle into a career.  Couples are waiting well into their 30’s to begin having children and nests are often not empty well into our 50’s.

With 60 being the new 50 and 50 being the new 40, why should we be surprised that when it comes to retirement, 75 is the new 65?  Even before the economic meltdown of 2008 over 80% of baby boomers said they planned on working in retirement.

If our retirement savings is in as dire a straits as we believe, then continued work well past normal retirement age is going to be a fact of life for millions upon millions of second-half baby boomers.  The solution for many of us is to find work that we enjoy and is personally satisfying. Work is not the enemy, but meaningless work is.   When you love what you do for a living, the retirement conversation becomes almost moot.

Posted in Uncategorized | Leave a comment

Financial Behavior in Retirement Conference

Check out the Third Annual Financial Behavior in Retirement Conference coming up in Chicago November 15 – 16.  Great line up of speakers including yours truly…

Posted in Uncategorized | Leave a comment