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Remember telling clients the financial plan was a dynamic document? You meant if their life situation changed, the plan can be adjusted accordingly. If the plan is like a roadmap, if there’s an accident five miles ahead blocking the highway, your need to reroute your journey. Have you put this dynamic quality into practice?
Bear in mind the client isn’t likely to give you much advance notice. Their job is at risk turns into “I just lost my job.” The reasonable assumption their twentysomething child will get married soon becomes “I just learned we have a wedding to plan. It’s in three months.”
Ten Reasons Change Is On the Horizon
You should periodically initiate the conversation. Here are some talking points.
- How long do you think you will keep working? The pandemic has gotten people thinking about how they want to spend the rest of their lives. They may also have concerns about job security. This can be a conversation about financial independence, early retirement and moderating their living standards.
- What’s going on in your children’s lives? Who is going to college and when? What’s it going to cost? Have you been surprised with someone’s need for a graduate degree? Have any of your children moved back home? Are there any weddings on the horizon? If they are married, any children on the way? Several of these have price tags attached. They are too large to cover out of pocket. They should be anticipated and provided for in advance.
- Where do you have money besides here? By now you have a trusting relationship. It’s one thing for them to do online trading on the side, it’s another to have orphaned IRAs, bank CDs and smaller brokerage accounts. This can tie into producing a wealth report or net worth statement. You can make the case for consolidation, especially if they don’t have a high touch relationship at the other institutions.
- Let’s review the insurance coverage for your house and contents. Real estate prices have been doing pretty well. At the same time, there seem to be more floods and forest fires than normal. Your client might own multiple properties in different states. If they have collectibles, those might have risen in value. What kind of coverage do they have? Do they have enough of the right insurance.
- How are your parents doing? There are many situations where the adult children become caregivers for their aging parents. There’s the possibility living in a retirement community or assisted living facility makes sense. These costs need to be covered. If the parents move in with the client (or move to a retirement community), there’s a case for selling the family home where the parents live to raise cash.
- Have we heard the patter of little feet lately? Are their adult children expecting children of their own? With the arrival of grandchildren often comes the “promise” of helping to fund their education. Time passes quickly. Private primary school can cost what we used to think was the cost of college tuition. Educational needs should be anticipated.
- Are you spending more than you are bringing in? If so, then they are accumulating debt. Like excess weight, it’s easy to add and difficult to take off. This can be a credit discussion, trying to consolidate at lower rates but it can be a budgeting discussion. Do they know where their money is going? When things are going well, budgeting often goes out the window.
- Let’s talk about health insurance. The pandemic has made people aware some things are covered and others are not. You client knows health care costs are rising faster than inflation. This is a good moment to review their coverage and shop around.
- No one wants to talk about long term care. But we should. LTC sounds like something healthy people don’t need. Unfortunately, they don’t stay healthy forever. People are living longer, but bodies wear out. Long Term Care insurance, like life insurance, is smart to buy when you are younger.
- Is estate planning an issue? The Federal estate tax thresholds are comfortably high. Right now, the threshold is $ 11.7 million. The tax on the overage is 40%. But the talk in Washington is about lowering the thresholds, exposing more Americans to estate taxes. Your client might be below the threshold now, but financial planning can extrapolate what their net worth might look like 10, 20 or 30 years down the road. There may be a need.
Even if no changes are needed, clients will appreciate you taking the time to review their financial plan, especially the dynamic aspects.