Saying ‘I do!’ to a financial plan

This article originally appeared in our sister publication, Conseiller. Read the original version in French here.

Have you ever prepared a retirement projection or financial plan for a client who didn’t see the point of it? Or worse, has a client ever agreed to have a financial plan prepared for them without being ready to commit?

Here are suggestions to help secure a sincere commitment from clients and make them say “I do!” with conviction.

Anticipating client questions

For your plan to have the desired effect, clients must want to actively take part in making it a reality. How can you stimulate their interest?

Among other benefits, a retirement projection allows you to inform clients of how their assets will change in value, and to plan for their objectives, savings and withdrawals.

It also offers the chance to reassure them by answering their questions. When the projection answers a specific question from a client, your work’s true value becomes clear.

Projections provide personalized responses and allow clients to think about their financial future in a participatory way, involving them in developing the proposed solutions.

The questions clients ask can generally be grouped into five categories. It is important to find out which is the top priority. However, it is possible to answer more than one question in a projection by modifying data.

• Cost of living: This category concerns the client’s assets and expenses. This can involve questions such as:

• Will my assets and income be enough for my retirement?
• How much can I spend each year?
• My spouse just died. How much can I spend after I receive the life insurance payout?
• I want to buy a cottage. How would this impact my retirement?
• Can I keep my second home or do I need to sell it?
• I’d like to take a year off to take care of my kids or go back to school. How will this affect my finances?

• Financial markets: If they are a concern for clients, you can reassure them by carrying out sensitivity analyses that assess their ability to weather changes. For example, to illustrate a lower return over a long period, it is possible to compare the original scenario with another one where the return is 1% lower. Client questions may include:

• The decline in markets stresses me out. If there is a major drop, will I have enough assets and income for my retirement?
• I’m less and less comfortable with my investor profile. What would happen if I were more conservative?

• Insurance and estates: A client’s emotions are often involved, as this category affects their family and children. They may ask:

• How much can I leave my family in 10, 20 or 30 years?
• If I die, will my spouse be able to maintain the same lifestyle that we currently have?
• If I become disabled, do I have enough coverage to ensure I can maintain a satisfactory lifestyle?
• How much can I give to my children while I’m still alive?

• Tax decisions: Although planning tools are not tax software, they can help clients understand certain taxation basics. Client questions may include:

• I don’t think RRSPs or TFSAs are so advantageous. In my situation, what are the repercussions of contributing to these plans?
• My accountant is recommending an estate freeze. Would that put me at risk?
• Is it a good idea to cash out my RRSP before I turn 72?
• What will happen if I cash out my holding company right away?
• What are the consequences of deferring benefit payments (Old Age Security, Canada Pension Plan)?

• Ad-hoc decisions: These involve helping clients make informed choices on life situations that may arise.

• I just lost/quit my job. I need to choose between a pension and a lump-sum settlement. What are the consequences for my retirement projection?
• What effect can a divorce or separation have on my retirement?
• I want to make a sizeable donation to a charitable organization. Do I have enough to do that?

Giving clients concrete answers to their questions in a financial projection will allow you to get a formal commitment on their part—an “I do!” This will make it easier to implement solutions to help them achieve their objectives.

Charles-Antoine Gohier, financial planner, MBA, is the Practice Lead, Financial Planning, Wealth Management Solutions Group at National Bank Financial