How to help the client who's left it all a little late

5 mins read

Every now and then a client will walk through your door who probably should have done so a decade earlier. But all is not lost, there are steps you can take to ensure their retirement years are prosperous.

Every financial adviser has met with at least one client who seems to have left it all a little too late. You know the one. They've maxed out their credit cards, retirement is near and their annual income may soon be reduced to the pension.

On paper, they'll never be rich. But that doesn't mean you can't help them enjoy a rich retirement.

“There's always something we can do. But Rome wasn't built in a day,” says Tristan Gamack, Financial Adviser at Brisbane Money Management.

“Strategies can begin overnight, but big impacts take time. So we let them know that in order to make their retirement comfortable we really do need to take it step-by-step.”

Step 1: Cash flow is key

Gamack says his first step is to get a handle on the client’s spending, then make the necessary cuts. This involves helping clients discontinue any unnecessary recurring fixed expenses, such as Spotify, Netflix, Stan, Strava, Youtube premium and gym memberships, which can save about $100 a month.

Gamack then tries to instill discipline by encouraging clients to cut back on other unnecessary expenditures, such as daily coffees, takeaway food, restaurant meals and regular beers at the pub.

“We never really suggest going cold turkey – just limiting them. But if you can help cut back $20 a day, that's $15,000 in two years. That’s nothing to sneeze at,” Gamack says.

Step 2: Pay off the debts

Whether it's a credit card debt, personal loan, car loan or mortgage debt, Gamack advises clients that they need to either pay off, diminish or refinance their debts to get expenses down as soon as possible.

There's no point creating an investment strategy, even if it's yielding 10% returns, until high interest debts have been paid off, he says.

“If I could get the rest of my clients a 20% return each year from a balanced portfolio, I would already be retired,” adds Gamack.

Step 3: Trim the fat off insurances, review superannuation

Gamack's next step is to look at his client's insurances, such as health, life and even car insurances, to ensure they're appropriate and premiums are competitive.

“Not too long ago a woman in her mid-50s came in and we found she had pregnancy built into her health insurance,” Gamack recalls.

He also reviews his client's superannuation policy: “I confirm they've got an appropriate policy that's in line with their investment strategy and reduce costs where I can.”

Step 4: Locate the goalposts

A comfortable and happy retirement has many different meanings, says Gamack.

For some clients, a comfortable retirement means regular overseas holidays and several restaurant outings a week. For others, it may mean camping and living off $2,000 every other month.

But as a starting point, the Association of Superannuation Funds of Australia (ASFA)1 suggests a couple will need to retire on about $60,000 a year for a comfortable retirement, while a single person will require about $43,000 a year.

“It really depends on the client, so you've got to help them work out what they'll be comfortable and happy with,” says Gamack.

Step 5: Leave clients feeling motivated

Gamack says he finishes meetings with clients letting them know they've done very well to make the first step, and that he'll start putting the plan in place straight away.

Two questions he likes to ask new clients who are approaching retirement are: What would your financial position be if we caught up 10 years ago? And where would you be now?

“Their responses are always something like: 'I'd be rich, be able to take more holidays and far less stressed',” Gamack says.

“Then I usually reply: 'Well let's do it! Because if we don't do it now, in 10 years' time you'll likely be in the exact same position you are now: stressed, with no money and worried about the future.”

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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Brisbane Money Management is an external entity that is not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Brisbane Money Management and its employees does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties