As a financial advisor, your first step is to find out the goals of your client. The best way to do that is through fact-finding, which I talk about extensively in these videos…
1. Opening Language and Best Practices: This video teaches you how to have connectivity with your clients so you can learn more about them.
2. Articulate What Your Client Needs to Save for Retirement: The average person does not understand what they need to save for retirement, so it’s important to go through the fact-finding exercise.
3. Common Questions, Concerns, and their Rebuttals: You’ll learn how to answer common questions and objections that clients might have.
4. Meeting Role Play with Young Woman, no Prior Planning in Place:This role play shows the entire fact finding process from end to end.
Say your client wants to retire early, find out how much your client would need to contribute from the age of X (their current age) to be able to retire at the age of 45.
Early retirement isn’t easy, which is why most people can’t do it. A mixture of sound investment strategy, saving as much as possible, and keeping their expenses and debt in check can get them there.
You have to change their mindset, so they don’t assume that they will work continuously for 40 years at their current rate of pay.
You’ll find that a lot of your clients make assumptions based on their current situation. That’s a huge mistake because many people end up retiring earlier than they planned for various reasons such as becoming physically unable to work, while others end up leaving the workforce to deal with personal, familial, or other problems.
That’s why achieving financial independence as soon as possible by prioritizing retirement savings is so important.
There’s so much “stuff” out there people can easily be “deprived of.” Depending on the age of your client, you can encourage them to cut cable, maybe even Hulu and Netflix. There are plenty of things they could cut out without any real impact: redundant clothing/accessories, status symbols (e.g., designer anything or fancy cars), electronic gizmos (do they really need a brand new iPhone every year or two?), etc.
Imagine if they saved that money instead. What would it be worth in 50 years? This is a good example to use for your clients.
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It’s tempting to want to splurge and live it up with their money, but remind them that many people live a lifestyle supported by debt (big car payments, mortgages, credit cards, etc.) and actually have very little saved…they are throwing around borrowed money; to avoid that they need to focus on saving their discretionary income for retirement and paying off loans.
Paint the picture of compounding interest; it’s possible for a 25-year-old that contributes $300 monthly into mutual funds/ETFs, to end up retiring with $1.3 million at 65. In my Retirement Planning and Tax Diversification video, there’s a great downloadable illustration on compounding interest that will catch the attention of your clients. A penny a day compounded for 30 days vs $1,000/day for 30 days. You’ll be surprised to see how many people select the wrong option, and it becomes an eye opening illustration that shows the impact of compounding interest perfectly.
Emphasize that even though saving money for the distant future is not all that sexy, the younger they start, the more they are setting themselves up for success.
No matter what investment vehicle they choose their future self will thank them.
Achieving financial independence early doesn’t necessarily mean that they stop working, but rather gives them the flexibility to work fewer hours, work at a lower-paying job that they enjoy, or prioritize other savings goals.