Building a retirement plan is not a one-shot deal—at least not in my office. Crafting a plan that fits my clients’ needs takes multiple conversations, careful observation, and a personalized approach. But for that first meeting, I have a primary goal: to understand what peace of mind means to them.
I don’t use the financial services industry’s generic risk profile questionnaire to do that. Why? Those questionnaires don’t account for the fact that emotions drive decision making. Without that important insight—along with the potential for clients to misunderstand some of the questions—it’s all too easy to end up with an incorrect risk profile, and thus, an inadequate plan.
Instead, I apply a set of metrics that I have developed over more than three decades in this business and meetings with literally thousands of potential clients. My metrics provide me with everything I must know to do the best possible job for the client, whatever their circumstances may be. They take into account the reality that, while clients’ concerns are often similar, their situations are seldom the same.
To determine how to establish peace of mind, I start by asking about their biggest fears. When I know what keeps them up at night—the thought of running out of money, health issues, the cost of fulfilling their bucket list, and more—I can determine how to address it.
Next, I ask how much retirement savings they would need to feel financially secure. Often, people don’t know. They have a number in their minds, but it’s not based on anything concrete. When we drill down and look at lifestyle, purpose, family obligations—the whole nine yards—that amount may be more or less than what they quoted. But here’s the thing: we actually figure it out.
Another crucial question: What amount of income do you need to live comfortably? This can be tricky—we’re not talking about how much they need while they’re still working and contributing to a 401k. We’re talking about how much they need in retirement, when their circumstances may be different.
Without answers to these questions, I can’t devise a plan—not a good one, at least.
Of course, that doesn’t stop many firms from doing so anyway. Some even use robots. Answer those generic questions, push a couple of buttons, and voila: your retirement plan is done. That may be just the right solution for a fast-food drive-through, but it’s certainly not the way to go for retirement planning—particularly if peace of mind is the goal. And it should be.
My book, You’re Retired. Now What? provides more insight on creating a retirement plan that prioritizes peace of mind and personal success. You can learn more about it here.
