A time for difficult conversations

One of the reasons the average age of financial advisers is somewhere in the mid-50s — with so many working into their 70s — is that advisers enjoy what they do and want to keep doing it. Another reason is that many clients prefer to seek and heed advice from someone with experience and, hopefully, wisdom.

However, as much as clients have confidence in the wisdom of their adviser, there are times they may tune it out. This is probably one of those times, because what advisers are likely to say about client portfolios and retirement spending may not be what clients want to hear.

It’s easy to understand why. Inflation has surged, and equity and fixed-income markets have been on a roller coaster ride downward most of the year. Clients on the road to retirement have seen the value of IRAs, 401(k)s and other savings earmarked for their post-working years drop; higher prices have made it harder to save. Clients in retirement have experienced the same pain but must keep withdrawing funds from shrinking accounts because they don’t enjoy a steady paycheck.

One wise bit of advice that most advisers have told clients — and which many clients are heeding — is that it pays to ride out market downturns because the long-term trend in equity prices is upward. Repeating that historic truth is comforting, but as famed British economist John Maynard Keynes once noted, in the long term we’re all dead. So even if clients recognize the wisdom of hanging in there and not selling despite the market pointing even lower, what else should advisers be suggesting?

PROVEN STRATEGIES

To be sure, astute advisers are employing many strategies and investment approaches to help clients protect their portfolios and perhaps see growth. But in tough times there are two absolutely certain ways to ease the strain on investor nest eggs that advisers often find difficult to suggest: Reducing spending and either continuing or returning to work. It may be time for more conversations about these delicate issues.

The time-tested routes of spending less and earning more can provide greater retirement security.

Cutting back on spending is obviously impossible for millions of struggling American families. For many advised clients, however, spending less would not mean cutting out necessities but rather reducing some discretionary spending. Yet in a culture where visions of The Villages and Margaritaville dance in the heads of so many near-retirees, recommending one less cruise or a Subaru instead of a Volvo can make an adviser seem like Scrooge. Similarly, suggesting delaying Social Security until 70 or that a healthy retiree work to supplement income and preserve a nest egg also can be interpreted as being churlish. It’s understandable that advisers tread carefully when dealing with client dreams.

But dreams must eventually bow to reality. Until markets rebound, the time-tested routes of spending less and earning more can provide greater retirement security. And who knows, clients who have grown tired of the hassles of travel or who are embarrassed to admit being bored in retirement actually may welcome advice about trimming their spending and getting a part-time job.