Jan 02 2023
How to discuss retirement planning with clients
By Megan Gan
The idea of retiring seems very far off in the distant future for most clients and thinking about the urgency of planning for retirement is something they may under-estimate. For younger clients, retirement planning isn’t what they usually think about when they first start working. As financial advisors, it is crucial we encourage clients to begin retirement planning as soon as possible to avoid facing financial difficulties later in life.
Haslin Binti Hasan, a four-year MDRT member from Malaysia, shares how she gets her clients to feel more comfortable when discussing about retirement and encouraging them to start retirement planning early.
Ask thought-provoking questions to get the ball rolling
Financial advisors can pose questions that will enable the client to think deeper about their retirement plan. Haslin shares that very often, many of her clients who are just starting out or are in the prime of their careers feel taken aback when she starts talking about retirement planning. “I tell them, the earlier you start planning for your retirement, the lesser financial burden you will face when you retire in the future. I believe you’re never too young to start thinking about life after your career and I usually ask questions to get the ball rolling,” Haslin shared.
“Mr. Prospect, will you get old one day? When you are old, do you think you will need to retire from working? When you retire, do you think you will need a retirement fund to support your lifestyle? What are your overall financial goals?” Haslin explains these are starter questions she asks clients to set a spark about retirement planning no matter their age.
She adds if you want to be thorough with your client, a tip is to have on hand a checklist of the questions you plan to ask and work through the list with them. “This will help to ensure that you cover all the bases and provide them with the best possible advice.”
Understanding clients’ goals when planning for their retirement
Once clients become more open towards the conversation, financial advisors should keep an eye out on what long-term needs are important to their clients. For example, Haslin explains that some of her clients want to travel, while others are concerned about their family and want to set aside some assets for their children’s future.
“When planning for retirement, there are two important aspects to consider. Financial advisors need to ensure plans are realistic enough to enable clients to stick to and be consistent in their retirement planning as well to account for their desired long-term goals” Haslin elaborates.
For clients with investments, sometimes their financial goals are not aligned with what they value or to what is important to them. Ultimately, these are not aligned with their investment strategy. She says, “Having an idea of this can help you recalibrate their portfolios to protect what is important to them and to invest in companies to which their values are more aligned to.”
Create a savings timeline for clients
She also suggests financial advisors need to assess the type of lifestyle that clients would like to have and show them a timeline from their current age to the age they plan to retire. “I had done this for some of my more challenging clients, and they started to see the effectiveness of some of my proposals for them. Putting a timeline together helps demonstrate how much they will need to save now versus later, to avoid less hurdles in their retirement when they cannot fall back on a steady income.
Factors that will impact their retirement
Everyone wants to live a comfortable lifestyle when they retire but knowing how to do so may be a challenge for some clients. Haslin shared three critical retirement planning elements to discuss with your clients: investing, budgeting, and health.
Investing to encourage clients to investigate the various types of investment opportunities to diversify their portfolio. "Explaining what diversifying portfolio means and how it can help them with financial gains in the long run will give clients a better understanding on how they can start their research now and plan for their future," Haslin says.
Next, budgeting provides clients clarity on how to estimate their daily, monthly, and yearly expenses. This will help determine how much money they will need to live comfortably when they retire, as well as how they can begin saving money now to achieve their desired lifestyle when they retire.
Health is another element that takes up a considerable amount of finances when clients get older. "Our bodies slow down and our health conditions change as we age. As such, our clients should always be prepared to have a sum of money set aside to help us when we are in need."
Retirement planning may be a topic that many clients are reluctant to discuss about but emphasizing its importance will help clients better understand why it is necessary to start thinking about retirement planning early. "When I got my first paycheck, I started saving for retirement. I believe that everyone should too," Haslin shares.