Advisors well know that goal-setting among clients isn’t a uniform proposition. There’s the younger clients that are building savings for a house and just getting going in retirement planning. Then there the clients that more engaged in family planning, saving for college and wanting to bolster retirement accounts.
Of course, there are more seasoned clients that are prioritizing estate planning and elevated income in retirement. The one thing that is uniform is that clients, regardless of stage in life, can and do get off track. That scenario has been exacerbated over the past several years due to the coronavirus pandemic and soaring inflation.
Regardless of the reason why a client has suffered a setback on the road to reaching a particular goal, the overarching point is that this where advisors need to step up and prove their mettle. Fortunately, that objective is easy to accomplish, doesn’t require exotic advice or strategies and will almost certainly be appreciated by clients.
Simple Strategies for Getting Clients Back on Track
Some of the strategies advisors can deploy for getting clients back on the right path are easy to deploy. Three that come to mind are lengthening the client’s time horizons, altering the goal being discussed and reconfiguring portfolio allocations.
Let’s focus on the first and the third issues above because significant alterations to a client’s goals can be a sensitive topic. Imagine wanting a $1 million house and being told $400,000 is your reality. That’s not likely to be well received by the client, but there’s headway to be made on the other fronts. For clients that are off track in terms of retirement planning or overall portfolio value, it may be time to consider more exposure to risk assets, namely stocks.
“Stocks are more volatile than bonds and cash, but given enough time, their returns are also potentially higher, sometimes significantly so,” notes Dan Hunt, senior investment strategist at Morgan Stanley. “When investors increase their allocation to stocks in their portfolio, they take on more downside risk (risk of a portfolio decline during market corrections), but if they have a long enough horizon, they also increase their potential ability to achieve their goals.”
Some client goals, such as big vacations or second homes, have the luxury of time. Translation: Just because a client was derailed because of the pandemic or inflation, that doesn’t imply that trip or investment property is now a shattered dream. It can be realized with more time.
“Planning a trip to Spain to go running with the bulls? Maybe you can put off your trip of a lifetime for a few extra years. That will give you more time to save, and for your earnings to accumulate. It can make a big difference,” adds Morgan Stanley.
Consider All Options
Alright, I know I knocked the idea of dramatically altering a client’s goals, but it’s still better for an advisor to consider multiple options when it comes to getting the client back on the right path than it is to use an all-eggs-in-one-basket approach.
“Don’t view these options as a menu where you pick one and are done. Instead, if you’re off track, see if you can do some of each,” concludes Morgan Stanley. “You will find that the size of the adjustment you have to make for any one option, like increasing savings, will be much less if you make a few adjustments rather than trying to simply pull that one lever. How much of each option you choose will depend on your own individual circumstances.”