When Clients Are Their Own Worst Enemy


Let’s think about it. The best advice you can give clients is to live beneath their means. If they live above their means, they will incur ever-growing debt. If they live just at their level of means, they will never save and, thus, will never be able to retire. So, the only way to retire is to spend less money than what comes in. No matter the income level, many clients can fall into one of the first two unfortunate categories. As an advisor, it is our job to step in when clients are their own worst enemy. Here is my recommended four-step process:


1)            Meet with the client(s) and diplomatically bring up the subject. These clients have a sinking feeling, knowing intuitively that they are on the wrong financial path. However, money issues are emotional and stressful – meaning that you need to be nonjudgmental, calm and measured in your conversations.

2)            Explain the details of their financial situation. Again, it is important to do so in a tactful manner. Considering starting with, “I’m concerned about helping you secure your financial future.” Make it simple: While the clients are working, money coming in must be more than money going out. When the clients are retired, it is still important that money coming in is at least somewhat greater than money going out. Therefore, there are only two ways to influence that equation:

a.       Reduce spending

b.      Increase earnings

3)             Work with the clients to come up with a plan. This should be a truly collaborative effort. A good strategy will likely involve a combination of approaches.

a.       Reducing spending can be accomplished by:

                                                               i.      Cutting taxes

                                                             ii.      Taking advantage of tax-deferred savings

                                                            iii.      Cutting down on discretionary spending

                                                           iv.      Changing their living situation either before or after retirement – buying a home rather than renting (or vice versa), downsizing, moving to a different city/state

                                                             v.      Delaying retirement

b.      Increasing earnings can be accomplished by:

                                                               i.      Seeking a promotion, changing jobs or working toward a new career

                                                             ii.      Taking on additional work – a second job or spouse/partner working

                                                            iii.      Better structuring portfolio investments both for tax efficiency and maximizing risk/return parameters

                                                           iv.      Maximizing retirement benefits

                                                             v.      Delaying retirement

Of course there are other strategies that could apply based on specific client situations. The most important parts are getting buy-in from the clients and documenting the plan.


4)     The final step is follow-through. Schedule regular check-up meetings to monitor progress. Here, it is also important to be positive and matter-of-fact in your review.


It’s a fine line between living for today and saving for tomorrow. However, it’s up to us to make sure our clients don’t get too far off the line.

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