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

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

Where in the U.S. are RIAs growing the fastest?

InvestmentNews' deputy editor Robert Hordt talks to senior columnist Jeff Benjamin about his report on how registered investment advisers are faring in different regions of the country.

Latest news & opinion

Midwestern magic? RIA assets soared nearly 30% there last year

Theories for what's driving the growth spurt abound, but it surpassed all other regions of the country.

8 apps advisers love for getting stuff done

We reached out to advisers to find out which apps they are using to run their business more efficiently.

10 tax moves to squeeze in before the year ends

Here are some tax moves clients can still make before year-end.

Richard Neal: the new face driving retirement policy in Washington

As he becomes head of the House Ways and Means Committee, Rep. Richard Neal (D-Mass.) is poised to make some big changes.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print