Clients often come to their advisors with wish lists rather than goals. They may want to pay for their child’s university education, purchase a summer cottage and travel extensively after retirement — but have taken no steps to finance these ambitions. As a financial advisor, your role is to distinguish between unrealistic dreams and attainable objectives. Once you have helped your clients set reasonable goals, you can help find ways to achieve them.
“Sometimes, when clients come into your office,” says Rosemary Smyth, founder of Rosemary Smyth and Associates in Victoria, “a lot of what they’re saying is a dream, not a goal.”
For example, you might have a client in his late 40s who wants to spend his retirement years wintering in Barbados and summering in Halifax. But he has minimal retirement savings and is living beyond his means.
On the other hand, you might have a client the same age who has been contributing diligently to an RRSP and is looking for ways to invest her nest egg so that she can retire to her cottage at the age of 60.
For clients whose objectives are unfocused, Smyth suggests conducting a goal-setting exercise to help them define their personal targets. She recommends a strategy called SMART (specific, measurable, agreed upon, realistic and time-based). A discussion of goals that have these five qualities can help your client identify goals that they can achieve.
The following are steps you can take to help your clients turn lofty aspirations into attainable goals:
> Learn your client’s motivations
You can’t begin to offer meaningful advice unless you understand what motivates your client. Ask questions to find out more about what drives him or her, Smyth says. Try to get them to move from the general to the specific.
Smyth suggests going through the process of asking the “five whys,” an exercise used to reveal the root of an issue. Start by asking why a goal is of particular importance to your client. Then, challenge each subsequent answer with another “why?”
For example, if a client’s goal is to retire early, ask why. Also, try to find out why he or she wants to spend their time and money in certain ways. With every response you get, keep pressing for more details until you have a fuller picture.
“Whatever the last ‘why’ is [indicates] their overall intention,” Smyth says.
> Identify a course of action
Once you have a greater sense of your client’s needs, Smyth says, you can explore strategies to help them reach their goals. Map out possible solutions and steps they can take, whether it’s learning to budget properly or working with an accountant to find tax efficiencies.
If the goal is to retire by a certain age, consider all the factors that could contribute to — or impede — their progress, Smyth says. There might be instances in which you can project the likelihood of an outcome if spending patterns and other factors hold steady.
Depending on the actual goal, it might make sense to develop a financial plan or an estate plan, which formalizes the exercise.
> Set and track milestones
Establish short-term and long-term targets, Smyth says, to keep the client focused throughout the year. The client can plug key dates into a calendar in an effort to keep them accountable to the goals they’ve set with you. You can check in every time you meet to ensure those expectations are met.
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