How to handle clients who share Johnny Depp's alleged compulsive buying habits

Advisers offer new approaches to keeping clients within spending limits

May 11, 2017 @ 4:54 pm

By Liz Skinner

Johnny Depp
+ Zoom
Johnny Depp

Financial advisers who have dealt with clients like Johnny Depp, an alleged compulsive spender with $2 million in monthly bills, have found methods of reforming their clients' errant shopping.

Details of Mr. Depp's $30,000 monthly wine bills and other lavish expenses came out of the actor's $25 million lawsuit against his former managers. Those managers contend the impulsive star's spending is out of control.

If that's true, he's not alone. About 6% of Americans are compulsive buyers, according to research published in the American Journal of Psychiatry a decade ago. And many believe the advent of online shopping has exacerbated the problem further.

"Excessive spending is the number one barrier to saving for retirement," said Tia Lee, director of wealth planning at Spectrum Management Group.

She has a novel approach to helping clients after years of trying to get them to simply stay within a traditional budget usually failed.

Now she has compulsive spenders "budget their lives, not their money," she said.

(More: Fintech to make advisers better behavioral coaches)

Ms. Lee used such an approach with one woman who was racking up $12,000 a month shopping for clothes and other things online.

After examining a year's worth of her spending habits revealed lots of small purchases, Ms. Lee directed her client to put as many items as she wanted in her electronic cart during the week. But the client was only allowed to purchase them on Fridays.

The woman saved $5,000 a month because her own internal spending limits kicks in before she hits send on Fridays and so she removes some items from the cart before purchasing.

In another case, Ms. Lee had clients who spent too much on dinners in expensive restaurants so she told them to limit their nights out to four a month.

"The number of times you've been out is easier to keep track of than budgeting the amount you spend," she said.

For financial adviser Lora Hoff, the key to helping out-of-control clients curb their spending is to connect the costs to something they relate to well.

That requires engaging people in different ways.

For one woman, a dynamic spreadsheet with her monthly and weekly spending for groceries, housing, gas, etc. and her discretionary spending did the trick.

"When she plugged in her spending it would visibly reduce her availability for other items," Ms. Hoff said. "That made it a current impact instead of a future problem."

(More: To help clients succeed in investing, it may require a walk down bizarro Wall Street)

Other advisers said getting clients to refocus on the goals they have for their money can sometimes work to stop compulsive spending.

Sometimes advisers opt for more structured approaches to spending controls.

Financial adviser David Demming said he has struggled to get one of his 30-year-old clients to say no to his girlfriends' seemingly limitless expenses.

"We established an irrevocable trust with his brother and sister-in-law in charge of all funds," he said. "The girls don't like him as much now!"

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Stephanie Bogan: How financial advisers can achieve more by reframing their realities

By revaluating the choices they make and the outcomes that result from them, financial advisers can make sure they're properly serving those most important to them — their clients, according to Stephanie Bogan, founder of Educe Inc.

Latest news & opinion

Jay Clayton says SEC, DOL can give market 'clarity' on fiduciary rule

Chief regulator is confident two agencies could reach 'common ground' on an investment advice standard across all accounts.

Vanguard winning at bond inflows, too

But iShares is strong competition.

Sen. Gary Peters brings broker background to work every day on Capitol Hill

Michigan Democrat resists ripping up DOL fiduciary rule but would be open to some changes.

DOL fiduciary rule causing DC-plan record keepers to change business with insurance agents

Principal has communicated that independent agents must change their business models to keep receiving compensation.

DOL fiduciary rule opponents want to push implementation back until 2019

ICI, Chamber of Commerce among groups asking for delay, while Democratic lawmakers call on DOL to keep to its earlier planned schedule of Jan. 1, 2018.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print