The pace of change in the economy and markets these days adds some urgency to the question of how often advisers and clients should meet.
A reader recently asked about this, and I realized the answer today is different than it would have been in 2019, before the pandemic unleashed hell on the economy via inflation. Then, casual check-ins once every year would have sufficed. Nothing elaborate – just a chance to review developments and note changes.
Advisers need to do more in the financial world of 2024. So much is happening that can influence client finances, and advisers need to be on top of it. One detailed face-to-face meeting seems in order each year, plus another check-in as well.
Here are some of the developments that advisers and clients need to discuss:
- Did the client renew a mortgage? If so, how much higher are payments and might the client need to pull back on saving or investing to stay solvent each month?
- Speaking of mortgages, when does the client expect to be mortgage-free? Rising mortgage rates – and payments – mean some clients will need longer to get their mortgages paid off. This could limit their ability to switch their resources to retirement savings in their 50s or early 60s. Also, more people are retiring with mortgage debt, which in turn inflates their need for retirement income.
- Is the client quietly accumulating cash that is idling in low-interest savings accounts? The ups and downs of the past few years have persuaded some people to keep money safe and liquid in savings accounts. Inflation-beating returns from savings are available, but lots of money still rots in big bank saving accounts paying rates at the low end.
- What’s the client’s job situation? Are there raises or bonuses that can be deployed strategically? Or, is there a risk of layoff or a reduction in hours worked and, thus, income?
- How prepared is the client for financial emergencies? Emergency funds may not generate fees or commissions for advisers, but they’re a hedge against financial uncertainty.
- What has the client done to financially help adult kids? Not just how much money has been gifted – what future commitments have been made? Clients may also need help to say no to their kids where gifts aren’t affordable. Also, what about aging parents? The retiree with parents in their 90s is a situation we’re going to see increasingly often. Are those parents financially secure, or are there costs for care or other purposes that they cannot fully fund themselves?
- Investment returns: Advisers who try to minimize volatility in client portfolios may be generating returns that lag the big stock indexes lately, and clients may be stewing about that.
- Progress in meeting financial goals: A chance to add some perspective to investment returns. Are they sufficient that clients can retire when they want, with the income they need to meet their lifestyle expectations?
- Current events: Clients may be keen to ask how to adjust their portfolios to prepare for the coming U.S. election, even if these tweaks are guesswork and as likely to backfire as help. An opportunity to explain that strong diversification anticipates disruption.
- The disappointment of bonds: Bond returns have perked up lately, but investors are well aware of what their fixed-income holdings have cost them in returns over the past few years. A chance to review stock market risks going forward and caution against adding to equity holdings now.