In this Quarter’s ClientFile we are sharing the story of Allen and Lisa. A couple who had boundless love for one another, but when it came to communicating about their finances, the silence was deafening. They were on completely different pages financially speaking. Lisa had no idea how much was being spent and on what. Allen, though well intentioned, had brought their spending to a point where, if they didn’t receive bonuses, then they wouldn’t have enough money to pay their taxes.
When the couple came to us, Lisa was 60 and Allen was 65. They desperately wanted to be able to retire completely, stop working and commit their time to being with family and enjoying hobbies. Unfortunately, given their current financial situation, they had no context on how to make retirement a possibility or what they could reasonably afford to live on in retirement. When we first met Allen and Lisa, their relationship had become extremely strained due to the financial pressures they were under.
So often we find ourselves sitting across from families who have been torn apart by money. It is very common and we pride ourselves on the fact that we act as more than just a financial advisor in these situations--we act as a personal coach. Encouraging communication and getting our clients to open up about their relationships with money, the future they wish to see in front of them, the obstacles that might be preventing a clear path to those goals, etc., is the first step in our wealth management process.
As we got to know Allen and Lisa we began to see that they were more aligned than they thought when it came to their objectives and then, the task was turned to figuring out what was missing, what needed to be eliminated, and what needed to be rearranged.
Fortunately for Allen and Lisa, they both had a high earning capacity in the final years of their careers. So the real challenge for them was addressing some of the poor investment decisions they had made as well as creating a narrative that would help them change their spending habits together.
At its heart, financial planning is understanding the trade-offs of your decisions. With Allen and Lisa, they were going to make some slightly uncomfortable life changes in the short term in order to be comfortable for the long term. We presented them with a few different scenarios comparing how they were living now and what that would mean for them in retirement. We made several recommendations about changing their spending habits and helped foster confidence in the couple by demonstrating what the outcome would be if they made and stuck to those changes.
Next, we shifted our focus to their investments. Their assets were scattered, and though diversity is paramount to a well-structured portfolio, one doesn’t want a disorganized array of assets. So we educated Allen and Lisa on the benefits of a structured, globally diverse portfolio and we provided them with a personalized strategy for their investments. They learned about the benefits of working with a fiduciary to create an investment plan that is based on their personal financial goals and they began to feel more confident in their financial situation.
For Allen and Lisa, the critical component was to establish goals, make a plan and stick to it. Without their drive to make some tough choices about their spending, no good would have come out of the work we did with them in terms of communication and reinventing their relationship with each other and with money. They set a target retirement date for ten years. With a combination of dramatic changes in their spending habits and some positive outcomes with their jobs, the couple was able to retire in six years. We continue to have important conversations with Allen and Lisa. Now that they have made the transition from accumulation and savings to distribution, our discussions revolve around important questions such as what they can afford to spend each year and where that money will come from.
Being on the same page emotionally and intellectually when it comes to money is a tall order. Communication and being open about your history and relationship with money is a great place to start. For many people, there is a great deal of fear or doubt when it comes to talking about money. The only way to have the confidence to reach your goals is to start with a discussion about what can get you there and what might be standing in your way. We take great pride in being able to help our clients have these conversations and even greater pride in charting the course for them to meet their objectives.