How to help hesitant clients boost retirement spending and satisfaction

Serving clients is about so much more than the numbers.

Of course, clients look to financial professionals for skilled technical guidance and deep knowledge of investment instruments and tools to help them maximize portfolios and plan for a financially secure retirement.

But a recent study revealed that, in addition to financial and investing expertise, people choose to work with a professional for help keeping a long-term view to achieve their goals.1 In fact, the following top reasons cited for working with a professional focus on value that’s not directly measurable strictly in dollar terms, including:1

  • Reducing financial anxiety
  • Help with planning, organization and discipline
  • Aligning finances with personal values

As clients transition from a lifetime of saving and investing (with a focus on maximizing savings and portfolio balances) to the drawdown phase, emotional and behavioral adjustments may be just as challenging as building a retirement spending strategy.

Different clients can have widely varying reasons for their hesitancy to spend down their nest egg — and there’s plenty a financial professional can do to help boost their confidence to help them spend appropriately in retirement.

Understand what drives client satisfaction — and what influences spending behaviors

Diverse views on life and money can shape client satisfaction. While some clients may find great contentment in a life that’s “good enough,” others may always be looking for an upgrade or focus on attaining the “very best in life.” As baffling as it might sound, this second group — those driven to have or experience the “best” or the “most,” can struggle when it comes to watching their balances fall.

Along with different perspectives on what makes a good life, clients can have widely varying experiences with the simple act of spending money. Those who feel the pinch more acutely may have a hard time spending money they could comfortably afford to, and miss out on purchases or experiences that would add value and enjoyment to their “golden years.” 

On the other hand, those who don’t feel enough discomfort can spend down assets faster than they should — and that can come at the cost of their comfort in later years.

Financial distress, especially concerning spending, can get in the way of clients making appropriate financial decisions. This distress, often fueled by rising costs, economic uncertainty, inflation, changes in health and concerns about longevity, can be more pronounced in retirement as clients shift from saving to spending.

Guaranteed income’s role in boosting clients’ retirement confidence

Building an effective decumulation strategy that bolsters client confidence can start with a focus on guaranteed income like Social Security, pensions and income annuities. By crafting an income stream from guaranteed sources to cover essential expenses before turning to assets for discretionary spending, clients can feel more confident and in control, and that can enhance their overall financial well-being throughout retirement.

But for this approach to be effective, clients need clarity around what constitutes essential spending and what’s discretionary. And the difference between the two can vary a great deal from one individual to the next. Categorizing expenses as choices versus obligations requires an understanding of the core values that define a person’s needs and wants. 

That kind of clarity can come from probing client conversations. Behavioral finance tools like this values card sorting exercise can help structure and facilitate discussions that help clients identify and express the values that give their lives meaning. Empowered with self-awareness, they can more confidently sort the must-haves from the nice-to-haves, in terms of spending.

Emotional impacts of financial tools and presentations

It’s also important to recognize that for some clients, finances in general may be fraught with anxiety, whether as a result of their upbringing, past difficulties, or a lack of financial education. Even strictly data-driven information, like analytical results from financial tools and software applications, can have an emotional effect on a client. And emotions can drive behaviors, including financial choices — like whether or how much they’ll allow themselves to spend.

Related: Is the “4% rule” foolproof — or is it smart to take a second look?

So it’s important to provide appropriate context and nuance when using financial modeling tools. Help clients understand the difference between statistical probabilities and real life. Tools help foresee the full range of possible outcomes and include catastrophic scenarios in which every worst case comes true, likely or not. Factors like market performance and timing, health, inflation and longevity can vary a great deal from person to person.

Encouraging clients to focus on aspects of their finances (and their lives) within their control — even when talking about worst-case scenarios — can help foster a more empowered, less anxious view on retirement planning.

Behavioral financial advice: a holistic approach

Complementing financial and investment know-how with behavioral insights can help foster probing conversations that, in turn, help deepen client relationships. 

Clients need a sense of emotional safety to get comfortable enough to talk about their deepest core values. Building their awareness around their emotional reactions to financial topics like saving, investment risk, and spending can help financial professionals craft retirement plans that can meet their needs as they define them. And that can engender greater confidence to spend appropriately and enjoy a financially secure — and personally rewarding — retirement.

With our award-winning Behavioral Finance Advice program and guidance from BFA™-certified TruStageTM wholesalers, you can be well-prepared to help clients identify the values that drive their satisfaction, anticipate their emotional reactions to changing financial circumstances — and craft a retirement spending plan that works uniquely for them. 

Find out more by contacting your wholesaler, or reach out to the TruStage™ Annuities Solutions Desk at 877.345.GROW (4769), option 1.

Blog Sub Logo

Get updates & insights

Enter your email below to subscribe!