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Full Transcript:

Benjamin Haas  00:00 (Introduction)

At the Haas Financial Group, we philosophically believe that everyone needs to have a financial plan. We want to help them align the resources they have, pressing financial questions that come with a life transition, or change in situation. Or even more generally, just to help them look forward to trying to reach their goals and avoid some of the pitfalls that can come if they don't. While every client we work with is clearly going to be different and have a different situation, our advice needs to be personalized and unique. We know that we typically hear similar questions and clients have typically similar concerns based on the phase of life they're in. So, if you're wondering how we can help a typical pre-retired couple through financial planning, we're going to take a couple minutes and show you how. So Adam, let's define what we mean by a typical pre-retired couple through an example we've created, the Millers. Maybe share with us who they are, where they are in their life, and those goals or pain points that may lead them to seek us out.

Adam Werner  01:05 (Typical pre-retiree demographics)

We'll start by defining that pre-retiree age range and I joke that everyone's pre-retired until they retire. But for our purposes here, we would say anywhere from their early 50s, up until a year or two before Social Security says is their full retirement age, so their mid 60’s is kind of that bread-and-butter range where we're looking here. Obviously, the biggest goal in that realm is usually retirement. From an expense standpoint, it's often helping kids get through college, they may also have older parents that might need support, either physically or financially. Then that leads into the pain points of feeling sandwiched between their kids, potentially their parents, all while they're in their prime earning years while they are trying to deal with those competing goals all at the same time. Trying to understand those domino effects of any one decision, right? Nothing happens in a vacuum, it all can domino and each decision can affect another. Another pain point that we typically see for someone seeking out advice is that they may be getting too much advice from too many people in too many areas. Getting feedback from friends or family or coworkers, other financial professionals, oftentimes can be overwhelming and then it's hard to kind of pinpoint, well, here's what I should do and here's maybe something I should avoid. It's hard to make those decisions without that holistic approach. So, we would give personal and customized advice but the process that we would follow for this phase of life is pretty streamlined.

Benjamin Haas  03:05 (Haas Financial Group planning process)

Yes, so I'll pick it up there with the process. Often when we meet someone for the first time, as you said, they're probably coming to us ready to share those goals, or they come to us with a pain point, a specific fire, they need to have put out. Either way, they're going to come with a list of questions and it's always our goal to, as quickly as possible, address them and provide immediate education. Education is absolutely one of our six core values but I'd also say we have our list of questions that we want to ask them on the front end. Before we can even get to really diving into financial data on what makes up their situation, we just happen to strongly believe that our best advice is going to come from first understanding what matters most to them, right? How they think and feel about money, what they're prioritizing; we just think all of that's going to lead us to better understand how we should communicate to them. How are they going to best make decisions so that we really can offer our best advice. So, it's not uncommon for us in that first meeting to ask questions like, why is money important to you? Where do you see yourself in three years? What keeps you up at night? We just we think we need to understand your values and vision in order to advise you on your wealth. So, that's going to lead to our next step in the process and I'll toss it back to you. We need to learn what makes up their financial life. So let's talk about how we gather data? How would you and I and the team go about analyzing that. Then maybe let's give some financial highlights on what a fairly typical financial profile looks like, at that phase of life.

Adam Werner  04:42 (Pre-retiree financials and data gathering)

Yeah, we use a tool called eMoney as that's our financial planning tool that helps us aggregate data. There's a client portal that we can share with our clients that they can input a lot of that data. We like to use technology because it helps simplify the process. But that's not necessarily the only way, as there are certainly relationships that are not comfortable with using the technology, or they just don't feel they're tech savvy enough to really lean into it. Making copies of financial statements and kind of dumping it on our desk is more than acceptable. It really is just as you said, the more information we have, the better. Let us do that sifting through of the data to let you know what's important and what's not. For this pre-retiree couple, it's not so much a focus on cash management, paying bills, or making sure they have an adequate cash reserve, it really is more focused on their phase of life. What do I need to be saving for retirement? Helping my kids pay for education, where's that coming from? They may be getting towards the end of their mortgage, potentially, if it's not already paid off then it's probably close. There may be a lot of different investment accounts with different investment providers, either through job changes over the years or maybe they just started different accounts at different times. There's a lot of different balls in the air that they are juggling, and it's hard to keep track of it all and in one spot. Another thing that we typically see is that they had a simple will and it may not have been updated in quite a while. So that's one of the things that it seems so simple. But it's one of the boxes we like to check just to make sure that those little i's are dotted and their T's are crossed. Our job is to help them sift through all of that, find the gaps that we need to fill in terms of what data we would need, and then start to analyze what's actually going well and what's not. Then let's start to figure out how we can actually help them.

Benjamin Haas  07:04 (Planning proposal)

It's good to then talk about that next step because that's what we would propose to do when we're sifting through those documents at the onset of the relationship; how we can help and we'd offer that through a written proposal. The purpose of that document is to start to share with the couple, what we think your strengths are, the things that we think maybe aren't going well, but also be clear about the opportunities that we see in front of them and how we could help. We're going to list the questions that we'd answer through a planning process and we probably would share some initial reports to provide education to them to whatever level of detail they're comfortable with. Then, of course, at the end of that document, we want to fully disclose the cost to hire us and what those next steps would be. We want the Millers to know up front the expense to engage with us even before they hire us and we certainly want to quantify that. So, let's then talk about that document and about the typical questions for this phase of life that we would want to answer for a couple like the Millers, what would be in there?

Adam Werner  08:12 (Typical pre-retiree questions)

I think everyone comes with their own set of questions from their own specific situation. But more often than not that first one is, when does work become optional? When can I actually retire? And then branching off of that, it's when should I start social security? Maybe I have a pension and when should I start that? Should I choose one of the survivorship options? Maybe there's a lump sum option as well. Should I take that instead of the monthly payments leading up to retirement? Where should I be saving? Should I be using my 401(k)? Should I be using the Roth option? Should I just be saving in an after-tax investment account? Maybe the mortgage is all but paid off, should I take cash from my savings to just get that over and done with before I actually retire? Those are the typical questions that people come to us with and then there's always that subset of questions that we pose to them. There are questions that may not be front of mind questions that they didn't necessarily know they had in the first place. One of those may be in thinking about their investments, how do I actually take my investable assets and turn that into an income stream in retirement? How do I do that?

Benjamin Haas  09:29 (Pain points and variables)

Yeah, and how to handle the other “what if’s”, such as if the kids come back home after college or after the first job because something didn't work out, COVID-19 happens. Maybe one of their mothers need to move in because they do need to be physically cared for. What if part-time work popped up, where there was a consulting gig that was offered. How do you pay for health care if retirement happens before they turn 65 years old? It's maybe okay not to have all those answers but these are the types of things that we would bring to life today. To help people understand that they need to maintain some flexibility and they probably need to have an uncertainty bucket. That's a term that we use to kind of say we need to insulate ourselves from one of these, whether it's helping the kids or the parents.

Adam Werner  10:16 (eMoney's Decision Center)

The way that we walk people through that is using those scenarios and doing the planning work within eMoney as our financial planning tool and they have a section called the Decision Center. We can actually interactively go through, isolate certain variables, change certain assumptions, and really start to see in real time the impact on the likelihood of success in retirement that every little decision can make. Again, it's going back to that domino effect of any one decision can affect other pieces and you can start to pair these together to come up with what feels like a cohesive plan.

Benjamin Haas  10:55 (Planning Strategies)

It's that Decision Center coupled with our process of educating our clients that kind of leads ultimately to the strategy that we're going to want them to implement. More specifically for the Millers and a pre-retired couple, we give them the education on what we call our five retirement planning variables. You said it so well, it's to recognize that these variables are kind of intertwined in a way that if you change one, it's going to affect the other. So it is that time, how much time do I have? Or am I phasing into retirement? Versus what is the income that I know will be coming in against what my expenses are? Those expenses need to be a conversation of what needs to be covered versus what do you really want to have as kind of the fun money or the discretionary spending. If we can kind of figure out the difference there, that gap that needs to be filled from our savings, we can educate them to really know “what their number is”, what's the lump sum of savings they need, on day one of retirement to really feel confident that they're not going to run out of money. That is going to lead back to what do they need to be saving today and what is that risk-return profile they're going to need to have. Hopefully, they're in a spot where they can start to phase back on their risk but certainly this process is going to help us determine that and it really does lead really well into what you said, as part of the questions we need to answer is how do they need to restructure their portfolio for income. We give them a deep dive into what our three buckets are, which very broadly and very quickly, you need to have a cash reserve that's going to support the short-term so that a market like March of 2020 doesn't become a major stressor. Then you need to have investments that are producing income versus investments that are going to keep up with inflation over time and really do grow over time. That's the type of education we'd want to give all the while we like to call ourselves kind of the financial quarterback here; we're going to coordinate with the other professionals in their life, their tax professional, their estate planning attorney, and really make sure that this financial plan is supported by all the people that are supporting you. Let's maybe button this up. We've conceptually covered what the processes are, but let me ask you, then what is the relationship and the time commitment really look like for the Millers and then how do we go about delivering our advice?

Adam Werner  13:13 (Implementing the plan)

So initially, there's a lot of back and forth, it's meeting time on the front end where we get to learn about them, what their goals are, and what they're looking to accomplish. It's gathering all the data, it's sifting through the data, and then actually getting to that interactive part of the scenario planning. Then it’s educating them on their options and memorializing what that advice is, what are the actual recommendations? What is that to do list and then holding us and them accountable to that to do list, making it very clear who's going to do what and by when. Some people are happy to delegate a lot of those steps. Some want to be much more hands-on but it really just does depend on their preferences. So for the Millers kind of wrapping that service together, what we would do is called full partnership. It's not only comprehensive financial planning for a flat fee, again, that is clear and transparent on the front end before there's any commitment but then there's also asset management services as well through accounts with LPL Financial, if they choose to hire us to actively management any part of their investments.

Benjamin Haas  14:33 (Closing)

I think we would also say in summary that this planning process is an ongoing relationship. It's not a one-time transaction. I don't think anybody would come to us expecting some sort of product or answer to one question and then they go on their way. We're here to be an ongoing resource and have relationships, which means we're going to be checking in multiple times a year on that to-do list. We're going to be sharing updates with each other, reviewing specific parts of the plan to make sure they still fit and are relevant, and of course making adjustments when things need to change. So, for the Millers, getting to retirement would be a huge milestone that we'd want to be a partner in. But then once they do, we're going to shift their focus to helping them through their next phase of life, whatever that may bring.