MONEY financial advice

When Money Isn’t the Top Priority

Sometimes the right decision from the financial perspective is the wrong one from the human perspective.

As a financial planner, I sometimes have a tendency to look at personal finance as a matter of checking off boxes.

Emergency fund? Check. Budget? Check. Saving for retirement? No? Well there’s the hole. Let’s start right there.

There’s some value in that kind of thinking. After all, certain things are just good practice and running through that checklist is a good way to get a quick read on someone’s financial situation.

But I also remind myself to not take that mentality too far. I try to remember that good financial planning is really about helping my clients build a life they enjoy, and that money is just a tool that can help make that life possible.

Which means that sometimes the “correct” decision from a financial standpoint is not actually the correct decision. Sometimes happiness needs to take precedence.

I worked with a young couple recently who were about to have their second child. Like I do with all clients, I asked them right at the start why they were coming to me. What was it they wanted to achieve?

They told me that they wanted to make sure they were saving enough for retirement. They wanted to save for a new house with a bigger yard. They wanted to make sure they had the right insurance in place.

But what they really wanted was to see if they could make their budget work so that the wife could stay home with the kids. She felt like she was missing out on this once-in-a-lifetime opportunity, and they thought they might be in a position to make it work. So they came to me.

As I reviewed their situation, one thing was immediately clear: From a purely financial standpoint, switching to a single income was going to be a step backwards. The wife had a stable job, made good money with good company benefits, and it was going to be more difficult for them to reach some of their long-term goals without her income.

We talked about all of those things at our next meeting. I wanted them to make an informed decision (as did they), so it was important for them to know what they would be giving up.

But I also showed them how they could make it work with just the one income. We talked about some changes to their budget that would make it easier, and we planted the seeds of a plan to get some of their other savings back on track over the next few years.

I also shared my personal story with them. My wife quit her job when we had our first child, and it was a financial hit. But it was the lifestyle we wanted, and over the years we’ve found ways to compensate.

In the end, they decided to give it a shot. They knew exactly what kind of financial sacrifices they were making, but they also knew what kind of lifestyle they wanted. And if they could make the finances work around that lifestyle, that was the route they wanted to take.

We all make decisions every day to put happiness ahead of money. We eat dinner with our family instead of in front of our laptop catching up on work. We take our spouses on dates, go out with friends, and go on vacations. These are the moments that make our lives meaningful. They are the reason we care about money in the first place.

As I work with clients now, I try to remember that my job isn’t to help them check off all the right financial boxes. My job is to help them use their money to build a happy life.

Life, not money, is the real priority.

———-

Matt Becker is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents build a better financial future for their families. His free book, The New Family Financial Road Map, guides parents through the most important financial decisions that come with starting a family. Becker is a member of the XY Planning Network.

MONEY financial advice

The Wonderful Thing That Happens When a Financial Adviser Tells You the Truth

A tale of youthful stupidity holds the key to giving honest, genuine financial advice.

The most important event in my life is one of which I was long ashamed.

I was an 18-year-old punk with a monumental chip on my shoulder. You know, the kind of kid certain of his indestructability, sure of his immunity from the dangers of self-destructive behavior.

At 2:00 a.m. on a random Wednesday morning in June 1994, after a long day and night of double-ended candle-burning, I set out for home in my Plymouth Horizon. At the time, my car was bedecked with stickers loudly displaying the names of late-60s rock bands. No shoes, no seatbelt, no problem.

Not even halfway home, I was awakened by the sound of rumble strips, just in time to fully experience my car leaving the road and careening over an embankment. After rolling down the hill, the vehicle settled on its wheels and I, surprisingly, landed in the driver’s seat. But all was not well.

Broken glass. My right leg was visibly fractured. I had hit the passenger seat so hard that it was dislodged from its mooring. Blood dripped on my white T-shirt.

I was well steeped in the Die Hard and Lethal Weapon series, so I knew what was coming next — an explosion. Naturally, I busied myself with the task of escaping a fiery death.

The driver’s side door wouldn’t open, so I climbed across the center console with its five-speed stick shift. I’d later learn I had a broken femur. And a broken pelvis. The passenger door was also inoperable, so I crawled into the back seat, now really beginning to feel the pain. Neither of those doors would open. Metal had rolled down over the doors.

I gave up, right then, right there.

Four hours later, shortly after sunrise, a truck driver spotted the car. Soon thereafter, I was being shuttled into a helicopter headed for the R Adams Cowley Shock Trauma Center at the University of Maryland Medical Center. The last thing I remember hearing was, “This doesn’t look good. I don’t think this kid’s gonna make it.”

That initial prognosis almost proved accurate. At the hospital, my left lung collapsed. Uncooperative even when unconscious, I fought the breathing machines. The medical staff induced a coma, where I remained for five days. My parents were told that my chances of living had fallen below 10%.

Family and close friends were notified.

Obviously, I made it. But I suffered immensely with how to knit this incident into my life’s narrative. This wasn’t just some random, tragic occurrence. It was a natural outcome of poor decisions. I couldn’t reconcile why I’d been spared — a punk kid who didn’t care about anyone but himself.

I spurned physical therapy. I didn’t submit to psychological analysis for more than 12 years, until, after a series of panic attacks, I was diagnosed with symptoms of PTSD. There was simply no ignoring or escaping the shame of the most embarrassing event in my life.

But that chapter had to become part of my story.

I began working in the financial industry long before I learned to welcome this reconciliation, and I found myself right at home. Everyone seemed to be in the business of pretending. And it seemed to touch on everything.

How to dress, what car to drive, where to go to the gym. I was even taught how to answer the question, “So, how are you doing?” I couldn’t be entirely honest, of course.

I was just scraping by, in relative poverty, trying to convince the well-off to rely on me for financial advice. So, to salve my conscience, my sales manager had instructed me how to respond to that most common of questions in a way that was, as all the best lies are, partially true: “I’m doing…unbelievable!” Indeed.

I thought to myself: If I appear smart enough, educated enough, credentialed enough, experienced enough, then they will trust me. Believe me. (Pay me.)

Unfortunately, while the financial industry has built its case to the collective client by projecting a façade of impenetrable eminence, it has ignored the opportunity to build trust the way its built best. By being who we are. By being something most financial advisors are taught to never be — vulnerable.

“Vulnerability sounds like truth and feels like courage,” writes Brené Brown in her book, Daring Greatly. (If you haven’t seen her inspiring TEDxHouston talk, “The Power of Vulnerability,” treat yourself and join the 18 million souls who have.)

Perhaps the financial industry could exhibit more truth, financial regulators more courage, and advisers more vulnerability?

One financial adviser put vulnerability to the test on the biggest stage possible.

Carl Richards, one of my friends and colleagues, had reached every outward milestone of success. He was running a thriving independent advisory firm, writing for The New York Times, and working on his first book. But he knew there was a piece of him — a big piece — that he hadn’t yet reconciled with his personal story.

So he did the previously unthinkable. This financial adviser shared the story of his biggest financial mistake. In the Times.

What happened next was both fascinating and frightening. Richards, who wrote about losing his over-mortgaged house when the housing bubble burst, was strongly supported by some people in the financial world. Others, however, decried Richards as a professional heretic. Some even called for his credentials to be stripped. How dare he acknowledge financial fault and crack the public’s perception of our profession as perfect?

That stung, but the broader impact of Richards’ authenticity was remarkable. I asked him recently, “Now, three years since publishing your biggest financial mistake for the world to see, how much of an impact has that step in vulnerability had on your work and life?”

“A massive impact,” Carl said. “The surprising side effect has been what I’ve learned about the vulnerability of the human condition. None of us are immune. People have been willing to share with me because I’ve shared with them.”

My experience has been similar. The degree to which I’ve been willing to reconcile my worst moments with those I’d prefer that others see, the more I’ve been able to facilitate genuine relationships — genuine trust — with family, friends, clients and co-workers.

Of course I’m not suggesting that financial advisers should rely solely on anecdotal authenticity. Education, experience, credentials, a fiduciary ethic, and practicing what we preach are imperative. But they are a starting point. As Brown implores, “What we know matters, but who we are matters more.”

And who knows, vulnerability may even offer a competitive advantage as an adviser. While everyone else is trying to appear perfect, you can just be you.

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Financial planner, speaker, and author Tim Maurer, is a wealth adviser at Buckingham Asset Management and the director of personal finance for the BAM Alliance. A certified financial planner practitioner working with individuals, families and organizations, he also educates at private events and via TV, radio, print, and online media. “Personal finance is more personal than it is finance” is the central theme that drives his writing and speaking.

MONEY Financial Planning

Why Won’t People Guard Their Wealth?

As you build wealth, you need to protect it using LLCs, trusts, and other entities. Here's what gets in the way.

Divorce, bankruptcy, lawsuits: These are the most common threats to a person’s assets. As we financial planners help clients build wealth, we also need to help them protect it. Unfortunately, sometimes they won’t let us.

A basic strategy for asset protection — an often-overlooked aspect of comprehensive financial planning — is to put property beyond the reach of legal judgments.

Yet when I suggest asset protection strategies to clients — for example, owning assets in limited liability companies — they often respond with ambivalence or reluctance. I now realize these reactions may be tied to the beliefs clients hold about money and wealth. It isn’t enough for us planners to understand asset protection; we also need the skills to help clients reframe the beliefs that may keep them from protecting themselves.

I’ve encountered several different common beliefs, or money scripts, that clients have pertaining to asset protection. Here are some of them, along with my responses:

  • “Liability insurance is all you need.” While liability insurance is a good start, it protects you only if (1) the claim doesn’t exceed your insurance coverage; (2) your policy is in force; (3) your insurer doesn’t deny the claim; and (4) your insurance company doesn’t go bankrupt in the middle of a lawsuit. Well, three of those four exceptions have happened to me.
  • “If you are ‘lucky’ enough to have a lot, it’s petty and selfish to want to protect it.” Asset protection isn’t just about the owner of the asset. It also safeguards others, such as employees, tenants, or family members.
  • “Asset protection is only for the very rich.” A client may have a small investment portfolio, some rental property, or a small business. That may not represent great wealth, but whatever they have is all they have. For that very reason, asset protection may be especially important for those without a lot of wealth.
  • “Asset protection is shady and unethical.” Many people associate asset protection with hiding assets illegally. This is not what any reputable professional will advise clients to do. Planners need to be prepared to discuss the ethics as well as the strategic value of the approaches they suggest.
  • “People in general can be trusted, so asset protection isn’t necessary.” Just ask anyone who’s ever been through a nasty dissolution of a partnership if they fully trusted their partner when they went into business — and how strong that trust was at the time of the breakup.
  • “You won’t be sued unless you do something wrong.” In an ideal world, this would be true. In the world we live in, it’s surprising how often people of perceived wealth are the targets of frivolous lawsuits. Most cases are without merit and are eventually dismissed or decided in favor of the defendant, but it takes a lot of time, energy, and money to defend against them. Plaintiffs hope to gain a settlement from a defendant unwilling to go to that trouble and expense.
  • “It’s wrong to prevent people from collecting damages if they have been hurt.” If you have genuinely injured someone, of course you have an obligation to make that right. Strong asset protection includes provisions, like adequate liability insurance, that allow clients to take care of legitimate obligations without bankrupting themselves.

It’s important to make clear to clients that ethical asset protection strategies are not a way of avoiding responsibility. Asset protection is not intended to protect clients from the consequences of their own wrongdoing. Its primary purpose is to protect clients from the wrongdoing of others.

And the first phase of implementing that protection may be to help clients get past their own money scripts about asset protection.

———-

Rick Kahler, ChFC, is president of Kahler Financial Group, a fee-only financial planning firm. His work and research regarding the integration of financial planning and psychology has been featured or cited in scores of broadcast media, periodicals and books. He is a co-author of four books on financial planning and therapy. He is a faculty member at Golden Gate University and the former president of the Financial Therapy Association.

MONEY financial advice

When Hugging It Out Was a Bad Idea

An awkward moment with a client teaches a financial planner not to jump to conclusions.

“We fight about money all the time,” said Zelda. “Ever since we inherited money from the family business, it’s been a source of tension.”

Stan shook his head. “What do you want from me?” he asked.

It was a good question to be asking as we sat in my office. What did Zelda want from Stan, and what did he want from her? The couple, who had come to see me for coaching, were constantly arguing about their wealth. Before, when they hadn’t had enough to pay the bills, they worked as a team. Ironically, now that they had become millionaires, they were no longer so supportive. They had lost sight of how to soothe each other about the family finances.

“Stan,” I asked, “what do you think might help Zelda when she gets upset?”

He pondered for a minute and then quietly said, “A hug?”

“Perfect,” I responded. “What do you think?” I asked, turning toward his wife.

When our eyes met, it was evident that “perfect” was not the word she would have used.

Quickly I backtracked. “Zelda,” I said, “I am sorry I spoke for you. I can see from your reaction that Stan’s idea is not a good fit. Instead of a hug, what do you need from him?”

“I don’t know,” she exclaimed, “but certainly not a hug!”

This client meeting happened a few years ago, but the memory of Zelda’s stare is etched clearly in my mind. It is a painful reminder that for advisers, curiosity is a key skill and jumping to conclusions is never prudent. While I recovered by apologizing and asking questions to gather more information, it remained a difficult meeting.

Making assumptions and losing curiosity are common mistakes made by all helping professionals, even skilled ones. You get busy or distracted.

It is vital that before each client appointment you remind yourself to focus on understanding your clients’ perspectives and metaphorically stepping into their shoes. When done well, clients feel understood and heard. When done poorly, you hit bumps in the road like I did with Stan and Zelda.

How can you maintain an open mind in client meetings and not let your own ideas get in the way? Here are three techniques to get started:

1. Identify your money mindset. A money mindset is a set of thoughts and beliefs about money and its purpose in the world. This mindset is made up of individual “scripts” or automatic thoughts that impact your saving, spending and investing habits. You money mindset is formed between the ages of 5 and 15 by watching your parents and other adults interact with money. Because most of the beliefs are formed in a child’s mind, these scripts tend to be overly simplistic when it comes to managing finances as an adult. Making matters more difficult, most of us don’t consciously know what our money mindset is. Until we identify the mindset, it impacts our financial habits without our consent. This lack of insight can be problematic in client meetings if we operate from our mindset without taking the time to discover our clients’ perspective.

By identifying your money mindset, you can notice potential blind spots and triggers for you based on your own history. In this situation, I unconsciously tried to protect Stan from Zelda’s harsh judgment. This tapped into an early childhood experience in my own family.

A bettter tactic is to teach couples about money mindsets and how curiosity about your partner can defuse financial tension. As an adviser, you can role-model this work for your clients and use it to help couples resolve differences — or at least increase mutual understanding. As with most couples, Stan and Zelda’s arguments often stemmed from having very different money histories and mindsets.

2. Uncover your conflict mindset. Talking about money is still seen as a taboo topic; therefore, most of us don’t have a rulebook on how to fight fair financially. As an adviser, it is vital for you to uncover your automatic thoughts and beliefs about conflict and learn how to help couples resolve financial disagreements in a healthy way. Whether you grew up in a home that resembled the Sopranos, where fights were loud and overt, or were reared by parents who rarely raised their voices, your upbringing influences your work with couples.

The first step is to become aware of your conflict mindset and identify its strengths and its challenges. In this example, it is clear that I prefer that conflicts be resolved quickly — hence my rush to provide the tidy solution of a hug. Had I not picked up on Zelda’s body language, I may have assumed that I helped the couple find an answer. But really, what I had tried to do was use a Band-Aid to make myself feel better, not guide Stan and Zelda toward a meaningful resolution. When I took a step back and asked them more questions about their experience, I was more effective. The discussion was not tied up in a pretty bow by the end of the meeting, but it didn’t have to be.

3. Practice curiosity. As an adviser, curiosity is your best friend. When you go into each client meeting with a healthy dose of wonder and use this to ask powerful, open-ended questions, you learn more about your clients’ motives, money mindsets, and values. This information helps you design financial plans and strategies that are more successful in the long run.

The best part is that the process fosters trust. While the meeting with Stan and Zelda was far from perfect, it was a turning point in our adviser-client relationship. For the first time, they saw that I was not just an expert but a human being who could apologize, and that I was truly curious about their experience of receiving this new-found wealth. Sometimes the most difficult clients appointments teach you and your clients the most.

———-

Kathleen Burns Kingsbury is a wealth psychology expert, founder of KBK Wealth Connection, and the author of several books, including How to Give Financial Advice to Women and How to Give Financial Advice to Couples.

MONEY retirement income

The Single Biggest Retirement Mistake

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C.J. Burton—Corbis

Don't think of your retirement savings as one big bucket of money. Instead, divide up your assets.

The single biggest retirement mistake I see is that retirees don’t set aside funds for income during the early years of their retirement. They go directly from accumulating retirement funds to withdrawing them. And that can be a big problem.

Let me explain. The usual approach to retirement savings is to treat the client’s funds as if they are all in one pile. Under this method, the account is divvied up between stocks, bonds, and cash. A systematic monthly withdrawal begins to provide income, typically starting out at 4% of the client’s portfolio value for the first year. Each year afterward, the withdrawal amount is adjusted upward to match inflation.

This rate is considered by many advisers to be safe in terms of generating sustainable income over a two- or three-decade retirement. Unfortunately, it leaves many clients concerned about outliving their money. Let’s use 2008 as an example. At the time, I saw recent retirees who had $1,000,000 in their 401(k)s and who thought, based on the 4% formula, that they were set with $40,000 of annual income. Within the first year or two of their actual retirement, however, the market crashed and they were then drawing on a balance of $600,000. Most could not decrease their expenses, so they continued to withdraw $40,000 through the downturn, which was an actual withdrawal rate of almost 7%.Worse yet, the market crash caused retirees to lose confidence in their original plans. They pulled most, if not all, of their retirement funds out of the market, thus missing the ensuing recovery.

The compounding errors of higher-than-anticipated withdrawal rates and bad market-timing decisions doomed many to outliving their funds. This syndrome actually has a name: “sequence risk.” Academics are well aware of this risk, but few planners properly address the issue with clients and almost no individual investors are aware of the concept.

The problem can be alleviated by setting aside up to ten years’ worth of income at the inception of retirement. I address this problem with an approach called the Bucket Plan, which segments a retiree’s investible assets into three categories, or buckets.

Here is the breakdown:

  • The “Now” bucket is where the client’s operating cash, emergency funds and first-year retirement income reside. It will typically be a safe and liquid account such as a bank savings account, money market fund, or CD. These are the funds on which the client is willing to forgo a rate of return, in order to keep them safe and liquid. The amount allocated to the Now bucket will vary based on the clients assets and sources of income, but typically you would want to see no less than 12 months of living expenses here.
  • The “Soon” bucket has enough assets to cover up to ten years’ worth of income for the retiree. The Soon bucket is invested conservatively with little or no market risk. That way, we know we have ten years covered going into the plan regardless of what the stock market does.
  • The “Later” bucket funds income, and hopefully an increase in income, when the Soon bucket is exhausted. By then, the Later bucket has been invested uninterruptedly for at least 10 years. We reload another round of income into the Soon bucket, and the process starts all over again. The Later bucket is the appropriate place for capital market participation.

Financial planners have long used the analogies of an emergency fund and an accumulation/distribution fund. The real innovations here are the addition of the Soon bucket for near-term income and the method for communicating the concept to clients.

A client who was recently referred to me had the 4% systematic withdrawal that most financial advisers recommend. This did not seem to make him happy, though, since he could not see how his finances would last in the long run. He was not confident about what might happen if he needed more than the 4% income because of an emergency. He wondered whether there would be anything left over for his children to inherit. He was losing sleep and not enjoying his retirement at all.

I explained our Bucket Plan method. The Later bucket funding the Soon bucket made perfect sense to him. He also loved the idea of the Now bucket for emergencies and unexpected expenses. The real beauty of this approach is it gives retirees great peace of mind. They are much less likely to make bad market-timing decisions because a market correction will have no effect on their current income.

The bucket concept is simple to explain, and clients always understand the role their money is playing and why. Most importantly, they have the confidence to ride out market volatility because they know where their income is coming from. Sometimes simplicity can be quite sophisticated.

———-

Jeff Warnkin, CPA and CFP, of the JL Smith Group, specializes in holistic financial planning for pre-retired and retired residents of Ohio. He incorporates investments, insurance, taxes, and estate planning when building financial plans for clients’ retirement years. Warnkin has more than 25 years of experience in the financial services industry, and is life- and health-insurance licensed.

Read next: Here’s a Smart Strategy for Reducing Social Security Taxes

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MONEY Aging

When Dementia Threatens a Family’s Finances

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One in three adults will suffer from dementia. Here's how to achieve financial security — and a patient's dignity — when that happens.

My client sat across the table telling me about her late husband — first, his diagnosis of dementia, and then, his suicide a few years later.

On the night before he took his own life, she had finally gathered the strength to tell him he needed to turn their finances over to her. Larger than life when he was healthy, he had been a tremendous businessman. But the dementia had robbed him of sound decision-making, and she needed to protect what was left of their shrinking nest egg.

She asked me, “What should I have done?”

In the years since his death, she couldn’t help wondering whether that final financial conversation had been the tipping point in his waning will to live. It wasn’t her fault; she had supported him throughout his illness with an unmatched strength of conviction and marital devotion. It’s pointless to try to judge the effect of a particular conversation, because he had suffered for a decade. The disease had torn through their lives, leaving a series of wreckages: their relationships, his ability to handle even menial tasks, and — perhaps most painful — his self-esteem.

I told my client she had been in a no-win situation. She couldn’t risk her own future welfare by allowing her husband’s disease to squander all they had worked for. She was in her 60s, very healthy, and had a 100-year-old mother whose zest and longevity foretold of my client’s likely need to support herself for another 30-plus years. To protect herself and her husband from risky investments, unwise purchases and even fraud, my client needed to take over the financial reins. But how do you conduct this crucial conversation about control without robbing a dementia patient of his or her already-declining dignity? With the Alzheimer’s Association reporting one in three seniors in the United States contracts Alzheimer’s or dementia, it’s time we start talking about it.

Some advice:

Avoid a crisis. Don’t wait to have one huge conversation. Ideally, you would have a series of talks before anyone is diagnosed with dementia. As part of an overall estate plan, it’s important to discuss all family members’ wishes for the end of their lives and prepare them for the possibility of losing their independence. It may sound trite to say, “One day, Dad, we may take care of you the way you took care of us,” but laying that foundation ahead of time may soften the blow. It’s nice to think that we live on our own until the end, when we quietly pass in our sleep, but that isn’t our current reality. Medical advances have been successful in prolonging our lives, but not at guaranteeing our independence.

Having a big discussion that feels like a dementia patient is the subject of an intervention is stressful for all involved. Save the intervention-type conversations for true emergencies, and recognize the patient needs to feel safe and loved, not confronted.

Understand the backstory. Everyone brings a different money mindset to this conversation. Ask yourself, why is money important to this patient? Is it imperative to provide for the family? Is it a priority to give it away? Open the conversation by affirming the ways the patient has accomplished his financial objectives until this point.

Take into account any major financial experiences that may be coloring this particular conversation. Olivia Mellan, a psychotherapist specializing in money conflict resolution, points out that men and women can have different views of common financial decisions. If a wife wants to open her own bank account, for example, she may simply desire some independence. Her husband, however, may interpret her wishes as a lack of marital commitment. If a dementia patient has had this kind of conflict, structure your discussion to avoid triggering those old memories and feelings.

Pick your battles. Can the patient retain investment control over a $10,000 account? Is there room in the budget for a weekly allowance so he can continue making spending decisions? Both tactics can distract the patient from participating in larger financial decisions.

Steven A. Starnes, an adviser with Savant Capital Management, tells a story about his late grandmother, who passed away from Alzheimer’s. Out shopping with her daughter, she found a relatively expensive necklace she just had to have. The family had created room in the budget for one-time splurges that would bring joy to her remaining years. As long as the purchase didn’t thwart the family’s long-term financial plans, it was okay. So Starnes’ grandmother came home with a new necklace that drew her focus away from the other losses she was experiencing.

Utilize helpful resources. Some financial advisers are a tremendous help in facilitating these conversations. A person’s declining financial abilities are often the first sign of dementia, so advisers are well-positioned to help a family. Just having an outside party to ask the tough questions can ease the pressure. In fact, some advisers, including Starnes, specialize in clients with dementia.

A growing number of professionals specialize in different end-of-life issues. The National Association of Professional Geriatric Care Managers provides information about care management and a directory of professionals who can help clients attain their maximum functional potential

Another source to locate a professional is the Society of Certified Senior Advisors listing of certificants who have demonstrated expertise in a range of core competencies involving the aging process. Among those holding CSA accreditation are financial professionals, caregivers, gerontologists, and clergy.

To help a family prepare for a discussion of changing financial responsibilities, circulate the book Crucial Conversations, by Kerry Patterson. Another great resource is The Other Talk,by Tim Prosch, which specifically addresses end-of-life conversations between aging parents and adult children. Do some research on the best ways to communicate with dementia patients. It’s difficult work, but it is possible to absolve a dementia patient of financial responsibilities while helping him maintain his dignity.

———-

Candice McGarvey, CFP, is the Chief Story Changer of Her Dollars Financial Coaching. By working with women to increase their financial wellness, she brings clients through financial transitions. Via conversations that feel more like a coffee date than a meeting, her process improves a client’s financial strength and peace.

MONEY Financial Planning

When Clients Cry

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Maurice van der Velden/Getty Images

People are vulnerable when they talk about their dreams and fears with a financial planner. A planner has to be sensitive — and vulnerable too.

The first time a client cried in my office, it was as if I were hearing fingernails scratching on a chalkboard. I was uncomfortable and just wanted her to stop.

In my many years as a stockbroker, no one had ever cried in my office. My conversations with clients revolved mostly around the market and whether or not they should buy or sell a particular investment. When we talked about their family, it wasn’t an extensive conversation; rather, it was more of a “How’s everybody doing?” chat.

That changed when I became a financial planner.

Once I became a financial planner and started to dig deep into my clients’ family goals and fears about the future, I realized that market performance was important but paled in comparison to life planning. In fact, a lot of planners would agree that financial planning is not about particular investments or day-to-day market swings. Instead, it is about an individual sharing his or her goals and deepest fears in the hopes of getting help from a financial professional in achieving those goals and overcoming those fears.

Clients who open up like this are putting themselves in an emotionally vulnerable position. And I have come to realize that in order to be a more effective financial planner, I have to allow myself to be vulnerable too. It was not easy at first.

What do I mean by allowing myself to be vulnerable?

First, I had to stop talking about me and my accomplishments and listen more to my clients and what they wanted to accomplish. I remember that during my first meetings, I would do most of the talking. Now, if I start to get into my second sentence during a conversation, I hear a voice in my head reminding me to shut up, because it is really not about me.

Second, I bought a box of tissues and put it on my desk. That move might seem insignificant, but for me it’s huge. In the past, when someone started crying in my office, I would bolt out of my chair in search of tissue. It would take me a few minutes to find a paper towel, and I would return at about the time the crying stopped. Having a box of tissues on my desk allowed me to stay in the moment with my client. It allowed me to say my client and myself, “It’s safe to cry here. This is a no-judgment environment.”

Third, I had to be willing to acknowledge my own fears. Two words here: not easy. What helped were the many conversations I had with other financial planners and professionals who have been at this a lot longer than me. I’m a work in progress.

I’m not saying that being vulnerable means I feel a need to cry with my clients in order to be more effective at helping them. Not at all. I’ve learned, however, that by being emotionally vulnerable and in the moment with my clients, we are able to weather the highs and lows of life planning together a little better.

———-

Frank Paré is a certified financial planner in private practice in Oakland, California. He and his firm, PF Wealth Management Group, specialize in serving professional women in transition. Frank is currently on the board of the Financial Planning Association and was a recipient of the FPA’s 2011 Heart of Financial Planning award.

MONEY 401(k)s

Here’s a Good Reason Not to Fund Your 401(k)

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Don't get too caught up in the amount of money you're saving for retirement. Focus instead on the income you'll have.

We save for retirement so we can create income for ourselves when we stop receiving a paycheck. And as a financial planner, I am supposed to determine how much money clients need to sock away in order for them to generate enough income to sustain their lifestyle in retirement.

But if the income itself is the most important thing — not the amount of money you amass to create that income — why don’t we ever focus on building lifelong income streams outside of our investment portfolios?

A recent meeting with a client — I’ll call her Mary — sparked an interesting conversation on the subject.

The subject of the meeting was goal planning. We began by outlining SMART goals for the next year, five years, and beyond. Mary had a very specific goal for the next five years: She wanted to leave her current job and become a full-time real estate investor. Although quite interesting, this wasn’t necessarily a unique goal. Many people aspire to do this, yet they get caught up in concerns about retirement — and rightly so.

In order to truly go after this goal, Mary would have to cut back on her retirement savings. “Oh no,” says society. “How can she possibly reduce her 401(k) contributions? She’s in her early 30s and does not have anywhere near enough stowed away. Saving early and often is necessary to ensure that she can retire someday. Plus, tax deferral is too good to pass up!”

I disagree in this specific scenario. Mary happens to know a good deal about real estate. She may not be an expert investor yet, but she is working on it. It’s her dream to create a lifestyle funded by real estate activities, specifically rental income. Additionally, investment real estate can provide some great tax advantages.

However, in order for her to achieve this goal, she has to save for the next down payment on a second investment property (she currently has one such property). From the outside, this goal seems to stand in the way of saving for retirement. To achieve her five-year real estate investment goal at this stage in her life, she can’t fully fund her 401(k). She has to direct most of her savings toward future property purchases.

Let’s shift our point of view for a minute and look at this situation through a different lens. By buying rental properties, she is establishing a sustainable income stream — an alternate form of cash flow from which she can benefit now and in the future. As this rental income grows, her 401(k) and IRA balances become less relevant. The rent checks she receives monthly actually alleviate the burden of amassing a large amount of money for retirement. And she avoids the stress of watching stock market investments ride the economic roller coaster.

This approach is definitely not for most people, but it does raise an interesting question. What other income streams might we be able to establish that could supplement the income from our retirement portfolios? What can we create for ourselves that could take the place of pensions, Social Security, and even our 401(k) plans?

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Eric Roberge, CFP, is the founder of Beyond Your Hammock, where he works virtually with professionals in their 20s and 30s, helping them use money as a tool to live a life they love. Through personalized coaching, Eric helps clients organize their finances, set goals, and invest for the future.

Read next: 6 New Ideas That Could Help You Retire Better

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MONEY best of 2014

5 Bright Ideas That’ll Make You a Better Investor

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From lower-cost financial advice to a fresh way to find a bargain stock, the best new investing breakthroughs of the year.

Every year, there are innovators who come up with fresh solutions to nagging problems. Companies roll out new products or services, or improve on old ones. Researchers propose better theories to explain the world. Or stuff that’s been flying under the radar finally captivates a wide audience. For MONEY’s annual Best New Ideas list, our writers searched the world of money for the most compelling products, strategies, and insights of 2014. To make the list, these ideas—which cover the world of retirement, technology, health care, real estate, college, and more—have to be more than novel. They have to help you save money, make money, or improve the way you spend it, like these five investing innovations.

Best Way to Get Advice Cheaply

In 2014, Internet-based “robo-advisers” went from a novelty to a force that’s changing how you get and pay for money advice. In a nutshell: They’re driving costs to the floor. Some of investing’s biggest names are going robo. The competition breaks down into two types:

Portfolio Builders: Startups like Betterment and Wealthfront use algorithms to design you a mix of low-cost index funds. They charge no more than 0.25% to 0.35% of assets per year, less than traditional advisers. Giant Schwab has announced a similar, free service. (Schwab is paid in part by putting customers into Schwab’s funds.)

Computers plus people: LearnVest is more focused on saving and budgeting, but for $70 a month it will also connect you with a financial planner for investment and other advice. Vanguard’s new Personal Advisor Services will create a portfolio for you, and assign you a planner you can talk to, for 0.3% per year. The pilot program is open to existing customers with $100,000 to invest.

Best Answer to Your Toughest New Problem

With the Fed ending quantitative easing, the big worry is when interest rates will rise again. Since bond values fall when rates rise, the bonds you own for safety suddenly feel high-risk. But Colorado Springs financial planner Allan Roth says a look at the numbers should dampen your worry, as long as you have a long-term focus. After the initial drop, the higher yields you’ll get in bonds can help make up for the fall. Many Fed observers expect rates to rise one percentage point next year. Below is what happens in a typical bond fund if rates spike twice as much, by two percentage points, and then flatten out.

Annualized return

Best Timely Trick for Finding Bargain Stocks

Count All the Cash

When you’re hunting for a bargain stock, a rich dividend is a classic place to start. A big payout is a sign that a company has to do something extra to attract buyers. And a firm with cash to distribute may be more stable than other unloved stocks. But dividend yields average just 2% these days.

The concept: “If you just look at dividends you ignore a significant piece of the pie,” says portfolio manager Patrick O’Shaughnessy of O’Shaughnessy Asset Management. Also add in stock buybacks, which can be a better use of cash than costly acquisitions often are. To do that, calculate “shareholder yield.” A company paying 2% that bought back 3% of its shares in a year would have a 5% shareholder yield.

The new way to invest: Cambria Shareholder Yield ETF (SYLD) buys stocks that score high on this measure.

Best Reason to Be Skeptical About Market-Beating Claims

Many new mutual funds and ETFs are based on the idea that by combing through past market returns, you can identify factors (such as company size) that explain why some stocks do better than others. But a new study by financial economists Campbell Harvey, Yan Liu, and Heqing Zhu argues that many of these discoveries are probably illusory. With the advent of cheap, powerful computers, academics are making more and more “discoveries”—over 200 just in the past 15 years. The sheer number of findings, the study argues, suggests researchers are simply picking up a lot of random noise.

Discoveries

Best Big Idea in Three Characters

“r>g”

That’s economist Thomas Piketty’s formula for economic inequality. In Capital in the 21st Century, Piketty says the return (r) on owning capital tends to be faster than economic growth (g). If he’s right, the rich will pull away from the rest. And it’s a reason to own stocks and other long-term assets.

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