Most Popular ArticlesSeptember 1, 2009
A Real Life Example
I met with two of my clients in June 2009, after the market hit recent lows in March and had started to go up. The market was still well below its peak in 2007.
These clients are hard-working, middle-class Americans in their late 50's. The husband is a former policeman now working in the private sector and his wife is an executive assistant. They earn a nice income, but, more importantly, they save a lot and live within their means. They've reared two children and now have three grandchildren. They're great people.
We began the planning process about a year ago and established their ideal and acceptable goals. I delivered advice that reflected their priorities and things that are important to them. We struck a nice balance between their ideal and acceptable goals, and they were happy with the advice going forward. We have regular updates and conversations, but our latest review was that June meeting
In updating their information in preparation for the meeting, I discovered something that surprised me. Through disciplined savings and the recent market performance, they were now able to achieve all of their ideal goals. I confirmed that I'd updated everything properly and together we reached the same conclusion. These clients were on track to achieve each and every one of their ideal goals.
I had never encountered this and did not know what to do. My financial planning vendor offered some advice I will never forget: In the rare instances when this happens, a good planner should help his clients formulate a new set of ideal goals.
I’ll pause and let that sink in for a moment…
These clients had achieved everything they ever dreamed of, and I was in the fortunate position to go back to them and deliver the good news. Better still, I had one of the most rewarding client appointments I've ever experienced in my 16 years of delivering financial advice. We met for about an hour and brainstormed about things they never even considered.
Some amazing things happened. We talked about how they would love to be in a position to share some of their wealth with their family while they're still living. We created an annual travel budget to allow them to plan a family vacation every year and cover for their children and grandchildren as well as for themselves.
These clients are hard-working, and I told them they could retire at their ideal retirement age. But upon further discussion, the wife confided to me that she'd love to retire one or even two years earlier so she could spend more time with her mother while they were both still in good health.
She got misty eyed as we discussed this possibility.
And the icing on the cake was to consider moving their investments to my most conservative asset allocation. In their ideal goal set, they couldn’t consider my least risky investment allocation; however, in their new ideal goal set, it was under consideration.
If you think this story doesn't get better, I'm happy to report that it does.
After reviewing their new ideal goal set relative to their financial resources, we couldn't achieve everything, but we were able to plan for the wife to retire a couple of years earlier than previously planned, something they identified as their highest-priority goal. We were also able to lower their investment risk and partially fund their annual family vacation goal. This is advice done right.
How would these clients be affected if the market goes down 30% or more from its current levels?
I would go back to them and have a new discussion to generate new advice. The new advice may be to go back to their prior ideal goal set, or it may require even more significant changes. Fortunately, these clients know that things will change and they now have the benefit of experience, having seen how pulling and pushing the levers they control keeps them in the driver's seat.
After all, it's all about the clients, isn't it?
Russ Thornton is the founder and President of Thornton Wealth Management, a fee-only advisory firm based in Atlanta, GA. The concepts of identifying ideal and acceptable goals in dollar values and timing of goals, of investment risk, and the relative and/or proportionate priority amongst these goals as a constantly evolving advice process are the intellectual property of Wealthcare Capital Management and its patent pending Wealthcare advice process. Thornton uses Wealthcare in lieu of traditional financial planning.
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