Diagnosing miscommunication in retirement planning

By Curtis V. Cloke

When presenting a concern to a doctor, they typically ask questions to better understand symptoms and identify a root cause. They often start with a general assessment and become more specific, working to understand the full picture of your health.

Advisors should think in a similar way. To make informed recommendations to a client’s financial plan, you must gather as much information as possible. This process becomes difficult if there is a misunderstanding between advisor and client. The challenge most often comes from financial jargon and varying experiences with financial products.

Just how doctors simplify complicated medical terminology, advisors should adjust their financial planning terminology to help clients understand opportunities best suited to their goals and financial situation.

Identifying growth and risk potential

There’s no better place to start building a retirement plan than by taking an audit of a new client’s financial situation and priorities. This process sometimes involves a direct conversation, where you can gain valuable insights by reviewing their current insurance policies and income streams.

The information you gather can also be more intangible, like fears the client may have about their finances. Evaluating the full picture will always be a critical step in building a financial plan.

Discuss common concerns

Some clients will be very open with their financial concerns, while others may have trouble identifying their worries. To get the conversation started, you can share these common, observed, fears with your clients and see if any strike a chord:

1. Outliving Their Savings: Americans now face the reality that their retirement savings may not be enough to sustain them through the rest of their lives, especially with inflation increasing costs across the board. You can help clients curb this fear by providing models of how their savings will perform over time, along with strategies to adjust their plans as needs evolve.

2. Controlling Their Money: Americans want to be able to make their own decisions on how to spend their hard-earned funds instead of being kept in the dark with how their investments are performing. How can you ensure they feel in charge of their finances through retirement?

3. Leaving a Legacy: What happens to the client’s partner and their family after they are gone? How can you help your client feel secure that their loved ones, especially the surviving spouse, are protected in the event of the unexpected? This is often where additional life insurance or annuities can provide a sense of safety to clients.

4. Investment Mistakes: Americans don’t want to lose out on their hard-earned money because of tanking markets. This is why it’s integral that you walk the client through your thought process behind selecting any investments and have a promised stream of income to cover essential expenses before making investments. The more clarity you can bring the client on what they should expect, the better.

Listen, listen, listen

Now that you have a better idea about your client’s concerns, it is time to ask more questions and listen. For example, if the client is concerned about what they are leaving for their spouse and/or heirs, asking them about their life insurance policy can encourage them to share more about their fears and goals related to financial security.

In this case, it may be how much money they wish to leave behind or that they haven’t thought about various ‘what-if’ scenarios.

Instead of immediately offering a solution, it is best to listen to client concerns fully. You will be able to provide a recommendation when fully fleshing out the financial plan, but the main goal at this step is to understand the client. You can assure them that you have potential solutions in mind but refrain from jumping into long conversations filled with complicated terminology. It’s at this point that I recommend advisors use easy-to-understand language to replace financial jargon.

Clear, concise language

One of the best examples of how replacing financial jargon can enhance understanding is the concept of annuities. With such a wide array of annuity options available, it can be challenging to determine a client’s prior experiences with them.

Providing positive, simple language helps alleviate their stress, allowing you to provide digestible insight into which tools can aid their goal progression. I suggest using the terms ‘promise-based income’ and ‘risk-based income,’ rather than getting in the weeds with the specific types of annuities right away.

• Promise-based income: This is a type of income that will always be there. This could be something like a fixed-rate annuity or military retirement pension. Whatever the case, the client can rest easy knowing this income is secure. These are vital elements to a financial plan that enable you to identify reliable and predictable income sources for necessary expenses.

• Risk-based income: As the name implies, this income type is focused on growth. These assets are not used to cover regular expenses but instead work to add value their portfolio. This type of income could be from stocks and bonds, real estate investments, business shares and more. These funds could be affected by market performance, making them unpredictable and high risk, but could also lead to high reward and add value to a financial portfolio.

I have found that these terms help clients understand the purpose of each product and/or tool you are recommending while negating any pre-conceived notions. This is not meant to be a sales tactic, but a way to introduce genuine solutions designed to help the client reach their financial goals.

Throughout my career, I have always encouraged advisors to tackle difficult conversations by listening first. It’s extremely important to develop an understanding of your client beyond the dollars and cents.

Leveraging plain language instead of financial jargon opens an opportunity to get to know them – their goals, family, hobbies. This approach benefits all and ultimately leads to a strong client relationship that lasts.

About the Author: Curtis Cloke is an award-winning financial advisor and retirement professional, trainer, and speaker with over 37 years of experience in income distribution planning. Curtis provides his clients with experienced financial and retirement guidance. Curtis is an Adjunct Instructor with The American College of Financial Planning in King of Prussia, PA, for the Retirement Income Certified Professionals (RICP®) designation. Curtis began his career as a financial professional with Prudential Financial in 1987. After merging his company with another firm in 2004, he established an independent financial firm in 2014. Curtis is a 25-year MDRT member, achieving Top of the Table status during his membership.