Ep #162 - The Importance of Uncomfortable Conversations in Financial Planning (Part 2)

Ep 162 

[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. 

[00:00:27] Ben Haas: So last episode we had a really good conversation around some of I guess we called them the financial planning conversations that aren't always the most enjoyable specifically around, I think we hit retirement and some of the risks, and just how the honest truth needs to come out of us when somebody is presenting us with questions that there just aren't really positive responses to, right? 

Tell me I'm gonna be okay if I retire early, you know, can I do this? Can I do that? But we definitely had some other examples of conversations that we have with clients that from our point of view, we use the doctor analogy, it's not our job, and it shouldn't be any advisor's job to just be a yes man or tell people what they wanna hear. 

The job is to diagnose the situation, be honest about the path we see forward, educate, and clear is kind. So let's maybe jump back into some of those other examples where we're having communications with clients, and we need to be really honest about where they are or where we see them heading, even if that gets a little bit uncomfortable. 

[00:01:28] Adam Werner: Yeah. So speaking of uncomfortable let's talk about investments. And... 

[00:01:33] Ben Haas: How did we have a 20-minute podcast and didn't talk about uncomfortable conversations around investments? 

[00:01:39] Adam Werner: I was just gonna say, yeah, we were talking about retirement and risks in retirement, and we didn't even touch on the whole investment world, and maybe that's, 

[00:01:45] Ben Haas: let's do it 

[00:01:46] Adam Werner: for good reason. Let's jump into it. We've had clients come to us and just want to make investment decisions either based on their feelings on where they see things headed. Politics are a big one there. I know we've talked about that in different aspects. 

And then sometimes it is just that general market timing, like, "I'm feeling this. What do you think?" And sometimes it is, piggybacking on top of that, "This is how I'm feeling. I want to go to cash. Like, I want to sell out, and I'm gonna be comfortable going to cash." And where for us it would be very easy to say, "Yep, great. 

This is what we're gonna do. You're gonna feel better." 

[00:02:19] Ben Haas: what you want. Yep. 

[00:02:21] Adam Werner: Yeah, and that's, again, that's not our responsibility. Odds are we've been working with somebody for a very long time. We've built this relationship. We do care about these people w- well into the future, and if we don't think that's the best thing for them, then we're going to say as much and hopefully hold their hand enough through that process to come out the other side. 

I was having a conversation earlier this week with Tony, new planner in our office, and just walking him through. We've lost two clients that I can remember you know, since 2015 that just sold out during very volatile markets and essentially picked the bottom of both of those time periods. 

And those will stick with me. Like, those are situations that we would want to avoid, not just for ourselves, but for the client. 

[00:03:05] Ben Haas: Yeah. And to your point, there's so much to say here, and I can't say all of it at the same time. People have their own experiences with money, and especially when they're in retirement, the first thing we need to do is acknowledge that to them, this is like a finite pool of money. So while that whole idea of I'm gonna sell out is a very rational reaction, we know, based on the examples you just shared, it's often incredibly expensive. 

So the fact that there is, you know, some people that are just fear-based on how they go about this, there's ways that we need to navigate that. We need to seek to understand why that is. We need to anchor back on a plan for them. You know, it's okay to share facts and figures at some point, but that's the whole point of partnership here. 

But I think where it sometimes gets uncomfortable is when we recognize politics is the easy one, but there are others. Just biases that they have because of their life experiences, right? And that's what can be the uncomfortable part, because we can recognize this, and we don't wanna point the finger and go, "Well, you just have a recency bias." 

[00:04:05] Adam Werner: Yeah, right. 

[00:04:06] Ben Haas: But that is the job. It is to go back to this person. I'm, I'm thinking of one that I'm very close with. I feel like she is just on a seesaw. Like when the market's up, it's, "Why am I not getting more growth? Why... Should we take more risk?" When the market's down, it's, "Why am I taking any risk at all? I should just be in cash." 

Right? So she's just very reactive to the swings, and that's human nature. That is a, you know, we're just focused on recent experiences. But that, that can get uncomfortable because we see why somebody's reacting that way, and it's sometimes hard even for us to not... We just can't let that turn into we're pointing the finger, "Here's what's wrong with the way that you're approaching this." 

But it is our job to just kind of find a way to seek to understand how they feel before we're throwing facts and figures at them on, "Hey, long-term planning says this will be fine, so, you know, stick your head in the sand and ignore it, please." 

[00:05:02] Adam Werner: I'm thinking of a specific client, and I-- when I keep talking about, you know, time horizon, and here's why we're taking this risk, and here's why, you know, this volatility right now is not a concern to us over the long term. And he very frequently says back to me that, but I'm old. 

My time horizon is not what it used to be. So I don't-- I know what you're saying is true, but I don't know that I believe it," right? Like, "This is-- My time horizon is not 15 years. It could be five, Adam. I don't know." So just that aspect of it too is a little bit difficult. And sometimes you know, we, again, we s- we say we owe our conversations to these clients. 

Sometimes it's they may not necessarily like what we're kinda telling them. And that's difficult for us too, because I think we want our clients to like us. We don't want to create that friction just for the sake of creating friction. But there is often you used that recency bias, but even just we saw that this past, well, who knows when this one's gonna go out, but SpaceX, the IPO that is happening. 

We, we got a few inquiries that is, again, it just, it captures headlines. We get the questions. People kinda just wanna grab it and run with it, and it's, well, but how does this actually tie into your plan? Let's focus on the bigger picture for you, and would this any one decision, if it's, "Hey, we're gonna buy gold," or, "We're gonna go to cash," or, "You know what? 

I don't wanna hold any international investments because I don't believe in that. I just wanna own, US companies." We will have that conversation but spoiler alert for anybody listening, we are big believers in diversification and asset allocation, so odds are we're probably not going to deviate too far from that. 

But again, our role as the investment leader here, I don't wanna say professional, but just kinda helping people navigate that it is to have those uncomfortable conversations, and we've had many of them. And I'm hoping that people appreciate that just in retrospect. 

[00:07:00] Ben Haas: I'm gonna double down on something I said in the past podcast. I understand as an advisor that at some point that may mean I get... That must for some people mean that I'm going to get fired. 

[00:07:12] Adam Werner: Yeah 

[00:07:13] Ben Haas: But I have to have conviction in what I know in my heart to be the best thing for them to hear at that time, even if it is uncomfortable. 

So we know we've had those clients, and luckily, you know, I've gotten better about flushing that. So I'm, I don't even have a specific person in mind right now, but I know we've had those conversations on, "Look this is how we deal with, you know, market ups and downs. This is how we diversify. I know you don't want international, but you know, this is an important fundamental aspect of portfolio construction." 

And people don't like it, then it's fair for them to go, "I'm gonna get advice elsewhere." And we would even encourage that at this point. If you shouldn't be paying me for advice that you're not going to take but we're gonna do, I can promise anybody listening or any future people that would work with us, we're gonna do our best to present to you what we feel is best for you. 

That's the fiduciary responsibility we have, regardless of whether you like it or not. 

[00:08:10] Adam Werner: Yeah. 

[00:08:11] Ben Haas: And that can be uncomfortable. 

[00:08:12] Adam Werner: Yeah and this is not to say that, you know, Ben and Adam just have this rigid structure and take it or leave it. We lead with empathy in those situations, right? I, and maybe we've said this in other iterations, but the TV show " Ted Lasso," right? There's a whole, there's a whole scene there where it's, "Don't be judgmental, be curious." 

And I think we embrace that because oftentimes we will figure out, you know, whether it's the politically based investing or it's the fear-based in-investing approach, right? There's something there's some kernel that is driving this behavior, and we often want to try to figure out, okay, but what are they actually concerned about? 

Is it international investments, or is it I didn't save enough, and I don't trust or whatever, right? Whatever the scenario is, we wanna try to get to the bottom of that. So yes we do have kind of our guardrails on where we firmly believe people need to be but we still want to be curious, understand where they're coming from, and meet them where they're at with a lot of empathy, too 

[00:09:14] Ben Haas: So I think that's gonna lead to maybe categorically one more tough conversation that we have to have with people. And I will admit to you, this is probably the hardest one for me, because it-- when we have this belief as planners that money's just a tool to live the life you wanna live we certainly want people to spend in retirement. 

We want them to live their best life in a way that serves whatever that is to them. If it's the people around them, the relationships, you know, what gives them meaning, whatever that is, charitable, whatever. But there certainly are times where we have to have very hard conversations that, I wouldn't say this directly, but I'll be frank to set the table here: "You're spending too much. 

Like, this isn't sustainable." 

[00:09:56] Adam Werner: Right. Yeah and you're right. Those are the uncomfortable ones, especially because we've talked about this in many different podcasts and with many different clients, that is the opposite of that, where, yeah, they're not spending enough, they're not leveraging their savings enough to then go to the other side to say, "Well, but I heard this thing, Ben, and you're encouraging o- people to spend, and here I am doing it, and you're telling me I shouldn't be doing it. 

Like, stop talking out of both sides of your mouth." But yes, it is our... It is everything is kind of situational, right? We've said that before, too. Not everybody's... What will work for one is not gonna work for all. But yeah that, that unsustainable withdrawal rate, right? If we truly believe that somebody is, taking too much from their savings and investments, specifically early in retirement it's hard to extrapolate that out and, like, pinpoint, okay if you do nothing different, you know, here's when this money is gonna run out. 

And for some people that doesn't matter, right? It's, " But these are all the things I wanna do, and I'm just, I will deal with that consequence later." And ultimately, this goes back to what we said on the other podcast, we just wanna give people as much information and education to make the decision that's going to work for them. 

So if they're okay with the potential outcome of, "Hey, I'm gonna run out of money by the time I'm 80. Maybe I'll live longer than that, but I'm not planning on it, so I'm gonna roll the dice and I'm gonna be okay with that," 

That's still, it is... I was gonna say, that is still an incredibly difficult spot for us to be in because we don't want to plan on somebody passing away for their plan to work. 

[00:11:29] Ben Haas: Yeah. I know we-- it's a bad joke to make, but yeah, you can-- if you can tell me the day you pass away, look we'll make sure you bounce the last check you ever write. Like, we can do that. Math will work out. I know there's certain assumptions on, you know, rate of return, but it's-- where it sometimes gets uncomfortable is not just that scenario of, okay, we see this being unsustainable, it's then the conversation has to follow that. 

Because it may be that they have other levers that they could pull. You know, sometimes that's just I've got a property that I could liquidate. Maybe it's a second property that's been in the family. Again, it's our job to go, "Okay," but if you get to that point, to your example, you get to 80 and now your liquid reserves are exhausted. 

Like, now what? What is next? You know, is it-- are you going to be dependent on your children? Are you going to sell this property? Are you gonna move into this facility? Just what are those-- We have to have those conversations. And some of it too comes back to, and maybe I'll throw this back to you, I think we more see this where you have people that maybe they did a really good job saving, but they also had a lifestyle or an earning capacity when they were working that was pretty high that supported that lifestyle, but then the savings may not be able to support that lifestyle and through retirement. 

[00:12:45] Adam Werner: Yeah. Yeah, it's interesting. You know, and just thinking about that, we, we work with clients on m- many different sides of the spectrum when it comes to wealth. And really the driver for us in terms of like retirement success really is the behavior. L- live within your means, s- spend less than you bring in, and usually it will work out. 

So yeah we have clients that have not earned, you know, more than $100,000 during their lifetime and have a rock solid retirement kind of ahead of them because they live the way that they live based on the income that they have. The flip side of that is what you're talking about, and I feel like that is the trickier area where, yeah, maybe there was really good income. 

It allowed us to be good savers, but it allowed us to kind of build this lifestyle that we've become accustomed to. But now I'm going to retire, and maybe I didn't save quite enough to replicate the income that we've been used to, and now that lifestyle can't continue as is. Or maybe it can, but only for a period of time before... 

Yeah, maybe there is a lake house or a beach house or a cabin, whatever, right? A piece of property that, great, we had really good incomes, we were able to do these things. It was great for the family, it was great for the grandkids, but at some point, that may be the lever that needs to be pulled to, to get through the rest of retirement, theoretically. 

[00:14:04] Ben Haas: Yeah. And now I'm thinking too, It's sometimes hard for us to figure out what they actually know is a risk and what isn't. You know, that they may look at their savings and go, "I got a multimillion-dollar portfolio here," but not really understand or have the education yet on, on what that can produce. 

Or, you know, let's take this a different direction. They just talk to a lot of people. They do a lot of reading, and sometimes it's very uncomfortable for us to go, "Look, that may be true for that person, but that's not gonna be true for you." Right? And we can come up with any number of scenarios there, whether it's around when to select Social Security, or withdrawal rates, or what their portfolio's doing versus what your portfolio's doing. 

It's just, again, in the spirit of talking about things that are uncomfortable, it's our job to educate, lead with compassion. But I think when it comes to telling people, like, how to spend and whether they can or can't, that's a tough one for us. That is a tough one. 

[00:14:59] Adam Werner: For sure. For sure. So maybe we'll pivot to, to one more. It's the family conversations. I guess this ties in mostly to the estate planning side of things. It's, we've talked about this in different iterations. I'm actually going through this with my family now. You know, who should be the executor for the family in this instance, right? 

If you have multiple children, it's often defaulted to the oldest, but should that truly be the setup? It depends on the family, right? The situation where... Well, yeah, I'm thinking like that, the whole blended family side of things. It's how do you structure things in a way that is equal or fair or however they want to approach it, and that can be an uncomfortable conversation that is, you know, these-- I have three kids, I want to leave to these two, but maybe less to this other one. 

And sometimes we see it that is, well, these kids are doing fine. They don't need, they don't need anything if we pass away. They're okay on their own. But I have this other child who is struggling, and they wanna do the right thing by taking care of the person that maybe needs more help. 

But then that can create some family conflict and some family strife. So just having those conversations and trying to work through that to structure things in a way that they will feel good about is invaluable. 

[00:16:23] Ben Haas: Yeah, and here's where that can also get uncomfortable. It's when husband and wife don't agree, These things are important. We try to keep some of these tougher conversations somewhat light. I joke all the time that I've got, like, a referee shirt in the office here that I can wear in the conference room. 

But it, it-- Again, it's our job to educate on how things go, because a lot of estate settlement is very black and white, right? At the point where somebody passes away, the conflict doesn't start, you know, because someone died. It's because they either didn't know, expecta- expectations were never discussed. 

So it's our job to not let it get to that point, and joke on referee shirt or not, to come to that conference room and say, "Here's how this will go as it's written today." And make sure that everybody can be on the same page with that, even if it is uncomfortable to present that information to them. 

[00:17:13] Adam Werner: Yeah. Yes. So, so maybe bringing it all the way back to where this started with that doctor-patient kind of analogy, it really is just that. Let's have the conversations. We clearly want to lead with empathy, but and telling the truth, right? W- honesty and integrity to us is everything. 

We're not g- I was gonna say we're not gonna sugarcoat things, and maybe that's not true. Maybe we will... We'll sprinkle some sugar where it's needed, but we're gonna, but we're gonna, we're going to be open and honest and communicate clearly on, "Here are your options," which again, hopefully is just leading to them feeling good about making informed decisions for their situation. 

And we would hope that advisors would do the same for their clients as we would hope doctors are doing for their patients. 

[00:18:01] Ben Haas: Right, and that's just it. If it's uncomfortable today, hopefully that is creating more confidence later down the road that, okay, we explored this, we pivoted if we had to, or, you know, we made sure that this wasn't gonna become a red flag later. So it's all part of the job. All part of the job. 

[00:18:19] Adam Werner: So if you're looking to have an uncomfortable conversation, give us a call. 

[00:18:24] Ben Haas: We don't start there, let's be honest. All right. But appreciate you and certainly the way you approach it with me. Is what it is. We'll do what we have to do always. 

[00:18:39] 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.  

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