Ep #161 - The Importance of Uncomfortable Conversations in Financial Planning (Part 1)

[00:00:00] Ben Haas: Hi everyone, and welcome to AB Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple certified financial planners on how we think and feel about everyday financial planning questions, and what should really matter most to you. A healthier financial life starts now. 

Adam Werner: Today's topic that we're gonna go through is conversations that we think we owe our clients or that all advisors truly, if you are a true financial planner, owe your clients you know, as p- as part of the service, right? So we believe that some of the best, maybe most impactful planning conversations aren't always the happiest, most enjoyable conversations, right? 

Sometimes it is where the rubber truly meets the road those really difficult conversations. It's great for us to be able to deliver, you know, fantastic news and, "Hey, everything you wanna do is perfectly accomplishable by doing nothing different." Usually, that's not the reality for most people. 

So sometimes it is our job to help people pursue those dreams very simply, and sometimes it is to maybe slow down the process a bit, maybe slow them down a bit. Challenge some of their assumptions, point out some risks that maybe they hadn't considered, and discuss maybe some of the possibilities that they would rather avoid, through that planning process. 

But that doesn't always... Like I said, sometimes that is maybe a little bit uncomfortable for both parties. It's not just us, and it's not just the client. Like, it is just an uncomfortable conversation sometimes. But those are usually where change occurs, like where we're hoping that there is some evolution and getting somebody onto the right path, and sometimes it takes a little bit of effort 

[00:01:50] Ben Haas: Yeah, I think the parallel here that can be made is just thinking about not just financial health, but, like, physical health. Imagine certain conversations going to the doctor. You know, you don't always expect the doctor to just come out and say, "Hey, everything's fine. You don't have to worry about this. 

You know, keep doing what you're doing." The reality is there's certainly gonna be those times where they need to just be clear, to be kind, to tell you the truth, like explain, "Hey, if these are the risks, if you keep, you know, acting this way," if it's exercise, diet, like whatever it is for anybody this could be a problem. 

And it's not comfortable to hear that sometimes. We don't like to change. We don't like the spotlight being on the neg-negative things or the things that aren't going well for us. But it's just-- it's-- the same is true in financial planning, right? Much like the doctor, it is our responsibility. I'm glad you said that. 

You, like, used that word. It's our responsibility to make sure that if something-- if we don't see something going well or we see a problem coming down the road, that we shine some light on that and talk about how we're gonna deal with that or how we're gonna adjust to that. So, enough of a precursor. I think there are a lot of different parts of planning that we could talk about, but, you know, I'll just flip it back to you. 

[00:03:00] Adam Werner: Yeah. Knowing that our focus for many people is around that retirement planning kind of timeline that's kind of where we'll start, right? When maybe retirement isn't quite align- or their pot- a client's potential retirement isn't the reality of when they could retire may not align with when they're hoping to retire, which usually means, "Hey, I want to retire at an earlier age." 

We go through the planning process and find out maybe that's not the best situation for them, or the margin of error is just very slim. So there is a s- an example here that kind of sparked this whole idea. An incredibly uncomfortable conversation I had with a client, probab- a husband and wife, probably, I don't know, three or four years ago at this point. 

And it was, a difficult conversation of, "Hey here's when-- here's what we're looking for. I want to retire, you know, at this timeline. Here's what we're spending. Here's what we have saved," all of these things, and I had a really difficult time kind of navigating that conversation, and ultimately the client said to me, "I just want to hear you say that I'm going to be okay." 

And in that moment, I couldn't. I did not feel that was true, and therefore I didn't want to give a false sense of confidence for this person to retire early and then have to deal with maybe some really ugly dominoes later down the line. So just being able to have that conversation, talk through the trade-offs, right? 

If it's not now, here's what we need to kind of focus on. Like, these are the different levers that we can pull. And now here we are, however many years later, like I said, it's only been, you know, three-ish maybe. Client just retired in a much better spot, just feeling very confident and feeling, I think, very grateful for the process that we went through. 

Now, at the time, I didn't feel good leaving that conversation. I know they did not feel good leaving that conversation, but it was-- I'm so, so glad that we were able to have that open and honest discussion to hopefully lead to the point that we're at now, where everybody feels much better about where things are headed now moving forward. 

[00:05:09] Ben Haas: It's, ugh, it's such a good example of, like, the job that we really are required to do. And I don't know whether I'm talking to, like, our client base here or, like, a just a general listening audience or whether I'm gonna say this for other advisors. But I understand there's, like, a certain degree... 

Part of it being uncomfortable is if I just give them this bad news or this negative news, then they're gonna fire me. Like, they're not gonna wanna work with me anymore, and I totally get that. But that doesn't replace the conversation that needs to be had because fast-forward, had you just said to... 

I now I realize who you're talking about. Had you just said to that client, "You know what? Yes, I th- I think this will be fine," right? You just succumb to what he wanted you to say, that he was gonna be okay. Then down the road things aren't looking good, then y- you're gonna have to have a tough conversation later than anyway, right? 

That, "Hey, you know, this didn't go the way that we thought it would go, and now we don't have other levers to pull." Maybe it's now you can't go back to work, or we can't adjust when you select Social Security or whatever. Whatever the combination of assumptions we were using was. So it is, while it's uncomfortable, right? 

I'll just double down on your comment. There are things that clients need to hear from us, even if it is uncomfortable. And I'll maybe pivot here to maybe go into some more of these specifics. Sometimes what makes it uncomfortable is clients aren't thinking about the things that we know would be bigger variables later in life, and we gotta bring those conversations to the forefront, circling back to a comment I made earlier. 

When you talk about it early enough, even if it's uncomfortable, hopefully you still have levers to pull and options to have. I'm gonna go back to that doctor analogy. If we know there's a risk potentially down the road, better to know now what adjustments I can make that will potentially lead to a better outcome 

[00:06:51] Adam Werner: Yeah. And I think, you know, I know we've said this many times our role in this process isn't necessarily to just be black and white with, "Hey, here's exactly what you need to go... here's what you need to go do," you know, kind of take it or leave it. It really is the education or just giving people as much information as they need to make a comfortable decision for them, right? 

We're not necessarily needing to make that decision for them, but we want people to have as much of that pertinent information so that they can decide, right? Even if it's something as simple as, you know, maybe we feel like they're underestimating what they may need to spend in retirement ba-based on assumptions that they've shared, right? 

We've been through this with enough, you know, enough other clients that have navigated this transition to retirement to have a pretty good idea of what passes the sniff test and what doesn't. So sometimes it is just that. Like, "This is great. Here's what you told us. In our experience, here's maybe how this could play out." 

And again, just trying to give as much information for somebody to feel confident about their decision. Whatever that may work out for them or m- whatever that may look like for them, fine. We will kind of play within that sandbox. But yeah, we just wouldn't want people making a decision or potentially here when we're talking about retirement and a potentially irrevocable decision with many dominoes without having all of kind of the facts in front of them that if I do this is the potential path that I'm going to go down, and maybe there are some pitfalls along that lane. 

[00:08:20] Ben Haas: Yeah, we want to be optimists, right? We want to meet people where they are around this very exciting transition, you know, into retirement, specifically talking about retirement. But again, the plan doesn't care how much we want something, the math still matters. So if they don't, if they don't have a good understanding of healthcare risks, longevity risk what can happen if markets are kind of up or down and we're pulling money at the wrong time? 

W- we almost, I think we're kind of conditioned at this point. When I say we, I'm including you. We're conditioned at this point to almost want to punch holes in a plan with a client on the forefront so that we're not having a very difficult conversation down the road, right? I'm gonna lead back to a complete opposite client experience, and this is probably going back, I don't know, 10 years, where client did decide to retire. 

I was much younger in my career, maybe not as comfortable or maybe didn't have as much experience in being able to have walked people through this before. And the fact of the matter is, he probably shouldn't have retired when he retired. There wasn't enough set aside, and then there was always this tension around whenever the market was going down even a little bit of, "Why aren't you getting me out of the way? 

Why am we not stopping this bleeding? Why this, why that?" And the finger pointing really came back at me, where had it just been healthier conversations on the front end, a lot of that probably would've been avoided. So I think it's just super important in the planning process to not only have these tough conversations, but let's plant the seeds for the things that can go wrong, adjust the plan on the front end, and that really is probably saving tough conversations later. 

[00:09:58] Adam Werner: Oh my gosh, 100%. 'Cause not, not even just what you said there, you know, the thought of just having those conversations when even if there's not anything to really do or take action on in the short term, it's avoiding it in the future where it is truly a reactive conversation. 

[00:10:16] Ben Haas: Or a surprise 

[00:10:17] Adam Werner: Yes. Yes. 

Where now whatever I wanted to accomplish in retirement is kind of those options are being removed or s- something transpired, and I don't really have a whole lot of flexibility. I just kind of have to take it. And we know that's not where we want clients to get to. So even again if we're not making a decision in the here and now, it's at least planting the seed, like you said. 

And sometimes what we get out of those conversations is just you know, scenarios or situations that client want to-- wants to avoid, then we know, great, you don't want this experience then let's cross that off, and then here are our other kind of pathways. Sometimes that's enough of a conversation to just start to eliminate certain scenarios is sometimes an okay place to start 

[00:11:02] Ben Haas: Well, so let's stay there because I think when we talk about retirement, you know, the easy example is just like you said, the timeline, you know, of I'm at this age, how much do I have saved? But you-- I'm gonna cherry-pick some of your words from earlier. We've now been... You're-- When we're talking to a client, they're going through this experience once in their life, right? 

They're making this transition. We at least have experience with all these other clients that have gone through it, that part of our job, part of the role of the advisor, even if it's uncomfortable, is to say, "Okay this scenario, like your baseline scenario looks good, but here are all the other risks that maybe they haven't thought about," right? 

So maybe we just go through some of them to create some clarity here that it may be uncomfortable. We just did this podcast not that long ago for those that are really locked in to like listening to everyone or reading them. Like the future housing decision is sometimes an uncomfortable conversation around, you may not be able to age in place here. 

Your kids may not want this even though you want them to have it. There's expenses that could go skyrocket with you trying to move into some sort of other senior living community or assisted living. Like this is an uncomfortable conversation to have. I'll double down. Let's have it on the front end. 

I'm sure there's other scenarios. 

[00:12:18] Adam Werner: Well, there is, but I'll, take that one step further just on that, and I know we did just record this, that idea of the downsizing. I think that's again, where our experience and our role to bring some other anecdotal client evidence to the table. That is, we just wouldn't want people to be shortsighted in, "Okay, I'm gonna retire, I'm gonna downsize. 

I know maybe my plan isn't bulletproof when I retire, but I'm gonna sell the house, I'm gonna downsize. That's gonna be, you know, this other lump sum of money, and that's gonna carry me through." Where we know in reality that's not always the situation. So again, we just wouldn't want people making assumptions and banking on some future outcome that, in our opinion, may or may not come to fruition. 

And if we don't plan for that now, that would be a horrible surprise to find out much later in life. You know, if it's selling the house to pay for healthcare, that could be detrimental 

[00:13:09] Ben Haas: Yeah. Without any other buffer. You know, this is a really lame example, but we left for the beach on Sunday, and had I not given myse- like let's imagine I had to be at a certain spot at a certain time. I mapped everything out just fine on when we were leaving. Cruising through Philadelphia wasn't gonna be an issue. 

I didn't remember that the Phillies were playing at 1:00 at home on Sunday. That was a problem, right? Even if you think you have the best plans, if you can't pivot in the moment, that's a huge problem. 

[00:13:39] Adam Werner: Yeah. So we talked about the downsizing. We talked about just aging in place. Maybe it is the senior living communities. We know there's a lot of different costs that kind of go into that, and that, that is not a one-size-fits-all area. Healthcare, long-term care in retirement, we know for a lot of people that is a big variable. 

And where we may not have the known for that situation, again, I think we have the experience to kind of say, "Here are maybe some of the roadblocks or some of the hurdles that are upcoming. How would you like to kind of address these? And let's kind of go through those options." Another is just the estate planning side of things. 

I know we've talked about this many times, and it is one of, one of the last items that typically get checked off of somebody's list. And that's mostly because it's just not a, it's not a fun conversation. It is dealing with mortality and what happens when I'm not here, and that is hard, I think, for a lot of people to kind of put their brain into that spot. 

Like, "Okay, now I'm gone. What would I want to see happen?" But it's the, it's those potential for complexity, right? If there's a child that has special needs, that obviously has its own hurdles. We've heard from many clients, right? We have clients that are helping or supporting adult children, either purely financial because the world is expensive or because that child either has some money problems or maybe it is, you know, behavioral, legal, you name it. 

Yeah, you name it, we've seen it. And those things are just hard to kind of plan for. But they're conversations that should be had. If that is a potential, you know, sticking point or at least a variable in somebody's life we would want to help walk somebody through that so that if it ever came to fruition in the future, we have some options, or again, at least we've had the conversation to know, "Okay, this pathway, we're not gonna go down this road. 

We're g- we're gonna block that off, but then here are our other options." You know, blended family dynamics is a big one that, that we've helped people navigate because that is not a cookie cutter process to kind of go through. It is gonna be so hyper-specific to that person's situation. 

[00:15:51] Ben Haas: Yeah, and I'm glad you brought all that up because ev- even as you're talking through it, I'm thinking about those client situations that it is uncomfortable, right? They're both sitting in the room, now we're talking about their child, and h- hey, there's huge risks if you continue to support this. 

And I'm not, you know, and it's not our job to it's not our job to play psychologist or misrepresent ourselves in any certain way, but there are a lot of those conversations that need to be just education. If you continue to do this, here's how this could go. If you don't set this estate plan this way for a blended family, which is incredibly common at this point, and after the first one passes away, h- here's how this will go. 

And that can be uncomfortable. But I g- I guess that's the whole point. There are those things that people do not come to the office to ask questions about, but that doesn't make them any less important. It's our responsibility to just not answer the questions that they come with, but it's to bring up the questions that they haven't thought to ask, and sometimes that's just uncomfortable 

[00:16:53] Adam Werner: Yeah, and it's not an easy line to walk for an advisor either. Again, maybe now just talking to the broader listening space that's not just our clients. Because in, in our opinion, right, we don't wanna just be the yes men here that says, " Yep, this is what you wanna do. Yep, go do it." And be shortsighted in the... 

or we kind of put up that wall of, well, we don't wanna have an uncomfortable conversation, or we don't wanna tell this person no, so it'll... We'll, that'll we'll kick this can down the road. We'll tell them it's fine, and then we'll deal with the consequences later. That's not, that's not our approach. 

[00:17:23] Ben Haas: That's the sales world though still, right? 

[00:17:25] Adam Werner: That's fair 

[00:17:26] Ben Haas: Sales is, "I want you to feel good about this, so I don't need to focus on the things that aren't gonna make you feel good about this." 

[00:17:33] Adam Werner: Just yeah, fo-focus on only the upsides and none of the downsides. And I think that's-- I th- I know I've said this on a recent podcast too, like, I feel like I would hope our clients appreciate that of us, that I'm sure I get couched as a glass half empty person a lot of the time, and that 

[00:17:50] Ben Haas: What? No. 

[00:17:51] Adam Werner: But when it comes to these types of things, I'm hoping that, you know, that being my default kind of approach g-goes, i-is in the client's interest here, where we're not just glossing over these potential, you know, risks. We're bringing them to the table and maybe having some of these uncomfortable conversations sooner so that we feel better about their total plan. 

Hopefully, they feel better. That is, you know, I didn't even think about, you know, these potential risks in the future. At least we're having those conversations. And sometimes it may just be, you know, from our standpoint, it's yes, you can do this, but not quite on that timeline, right? Like, not yet. 

Or what we-- You said it, and I was-- I kind of alluded to it initially too. Sometimes it's just that margin of error just feels so razor thin that if everything kind of falls into place, yes, you can absolutely do this. But if any one of these other variables gets too far skewed from where our targets are, then that's where those uncomfortable conversations can happen, because then it's maybe there's unintended consequences that we are now having to deal with. 

So sometimes it is just that. Let's-- It's maybe not quite yet or the margin of error is very thin, so let's just be very cautious as to how we approach this moving forward. 

[00:19:13] Ben Haas: And that's partnership, right? Let's think this through. Let's make sure, you know, no stone is unturned here. I know we've got a lot more to say on this topic, so maybe let's just take a breath and plan to keep this conversation going another time. 

[00:19:25] Adam Werner: Yeah. So part two, to be continued. 

[00:19:29] Ben Haas: Appreciate you. 

[00:19:30] Adam Werner: See you then. 

Ben Haas: Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant, and financial advisor, or tax advisor prior to making any decisions or investing. Thanks for listening.  

Ticket #T010942

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