Talking With Clients in Different Phases of Life

As we age, it’s easier to reflect back on the phases of life and better appreciate the role each phase played in shaping us. Those awkward teen years, followed by the aspirational and challenging young adulthood. Then a fulfilling career, maybe a family and even a dream home, if we’re fortunate. It can feel like a rollercoaster ride, and then…

Just like that, retirement appears on the horizon and we wonder where the time went!

Life involves a series of financial phases, too, and it’s important to encourage your clients to take an active role in their financial decisions during each stage to help ensure fiscal stability and a positive overall experience with their lives.

Here are some tips on how to start the conversation with clients and help guide their awareness of the importance of each of these financial phases.

Strategies for the Three Financial Cycles of Life

Accumulation Phase

Typically occurring early in a person’s career, the accumulation phase focuses on building a solid foundation.

As you might have guessed, this can be easier said than done. People just starting out in the workforce often struggle to balance expenses and savings due to income restraints, student debt and a general lack of financial savvy as they take their first steps into the “real world.”

During this phase, advisors may need to spend more time helping clients establish a budget, set up an emergency fund and tackle debt. But it’s also wise to include investing in these early conversations.

Some young adults may believe they need to wait to start investing until they can “afford” it. It can be a challenge to convince them that setting aside just a small amount for investing every month is better than nothing. But it’s important to help them understand that if they wait, they could be missing out.

Using examples of compounding returns can clearly illustrate why it’s a good idea to start sooner rather than later, which can help motivate younger clients to enter the market.

These conversations should also include the importance of taking full advantage of an employer’s 401(k) plan if one is available, setting up an IRA and establishing a savings account, plus strategies for avoiding negative financial habits like impulse buying and overspending.

Consolidation Phase

Clients in this stage of life are more likely to have purchased a home, established a family and settled into a career with peak earnings. Some of life’s initial major expenses may be out of the way, while others such as a higher car payment or child’s college tuition may have become part of life.

In general, however, a larger portion of a person’s annual wage is available for investments. This is a busy stage of life, and many clients may be tempted to put their investments on autopilot. But is that really the best strategy?

Some clients may also consider withdrawing from retirement plans to pay for unplanned expenses or to splurge on that dream vacation or home theater system they’ve always wanted. 

Enjoying the finer things on occasion can be part of living the good life; however, it’s not ideal to fund such pleasures with early withdrawals from retirement plans. A candid conversation about early withdrawal fees and loss of future earnings growth may be all it takes to dissuade them from these potentially costly financial blunders. It can also help to go back to the conversation about compounding to show them the potential damage these withdrawals can do over time.

The consolidation phase is typically the time to increase contributions to their portfolio, not downsize. Talk with these clients about asset allocations that match their retirement horizon and risk tolerance and the benefits of increasing their presence in the market. 

It’s also important to remind them to ensure their family is protected from the unexpected, such as unexpected healthcare costs, and review their life insurance and estate planning.

Spending Phase

During retirement, investors ideally get to reap the rewards from the wise investment decisions they made earlier in life. This is why the right financial guidance and decision making is so important in the two earlier phases.

The spending phase can be incredibly fulfilling, providing the freedom to travel, enjoy hobbies or simply spend more time with loved ones.

Some investors become more risk averse as retirement approaches, especially if they’ve experienced market downturns throughout life. And once they do retire, it can be a real challenge to feel confident about withdrawing without exhausting their nest egg too soon.

With the current trend in lifespans, clients who retire today at age 65, for example, may need to rely on investment withdrawals that can sustain them for 18 or more years.1 Factor in potential inflation and market volatility, and investors in the spending phase may have a difficult time understanding the boundaries of their newfound freedom.

Talking with these clients about preserving their portfolio and managing risk is crucial. Help those who’ve entered retirement establish a sustainable withdrawal rate to know how much they can take out without running out of money. 

Tools to Help Guide Your Clients

Advisors should expect to make adjustments to any of these investments or strategies along the way, especially in response to changing market conditions or specific changes in clients’ life circumstances. Encourage adaptability to help manage expectations.

No matter where your clients are in life, they need an advisor they can feel confident with—one who can educate them about investing and address their evolving fears, anxieties and aspirations during each phase of life, financial and otherwise.

When you equip yourself with the right tools, it’s easier to provide the kind of guidance clients need throughout their lives. When you visit our resources page, you’ll find a hub of information you can use to help clients on every step of their financial journey.



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