Peter White CFP® believes it’s time retirement planning changed to focus more on the lifestyle goals and objectives of clients.

With Australians living and working longer, and staying more active when they eventually retire, the days of a passive retirement spent at the local bowls or RSL club are a thing of the past.

A new generation of clients is gearing up for retirement and is busy redefining retirement planning and how they plan to spend their twilight years.

So, is it time for financial planners to embrace a new style of retirement planning for their clients?

Time to challenge traditional retirement plans

For most planners, retirement planning for clients has always focused on the financial aspects of this life stage.

The main objective has been to ensure pre-retirement clients have saved enough money to get them through the years after they leave full-time work, explains Peter White CFP^®, a financial adviser with FPA Professional Practice, Abound Financial & Lifestyle Planning.

“Traditionally, clients didn’t think much about retirement planning until they paid off their home and got their kids through school. Then, when they were close to retirement, they would boost their super contributions, as they didn’t have a lot in their super account,” he says.

But all that is changing, with Australians now spending more than a quarter of their life in retirement.

In fact, Australians aged 65 have one of the highest life expectancies in the world, according to Australian Bureau of Statistics research. The latest Australian Life Tables show the average 65-year-old male can look forward to living another 19.9 years, while the average female is likely to enjoy 22.6 more years.

Time for a fresh approach

The lifestyle expectations of Australians in their 50s and 60s are also changing.

“What has changed is that the generation before had to preserve money and waited to have their ‘big holiday’ at the end of their working life. These ‘war babies’ were risk averse and looking to build their wealth,” says Peter.

“A big change occurred five to 10 years ago, when people wanted to bring lifestyle things forward. They want to do things now and know they are still going to be okay to retire.”

The practice is now taking a much more holistic approach to retirement planning with clients. “We are now adding in holidays and lifestyle things and incorporating them into retirement planning.”

Including current lifestyle aspirations is a new slant on the traditional approach to retirement planning.

“Clients want to ensure they have enough money for retirement, but also factor in their lifestyle now. With lifestyle planning, the financial and lifestyle aspects are much more entwined,” Peter says.

Lifestyle planning: goals not numbers

So, what does lifestyle planning actually involve?

Traditionally, retirement planning has concentrated on financial assets and superannuation. For clients, this has meant focusing on numbers, such as the date of their planned retirement, the retirement income their superannuation savings will deliver, and the investment returns they need to achieve.

Lifestyle planning on the other hand, focuses on where the client is heading, the lifestyle they want for themselves and their partner, and what they need to change to achieve a different financial future.

“It’s about building a roadmap for your whole life,” explains Peter.

“Lifestyle planning is about creating goals for the client and something to measure from, so they know where they are, where they want to be and how they are tracking in relation to those goals.”

This is a much more goals-driven approach to retirement.

“It is about asking questions around why, how and what-if. You are helping the client make a plan for their entire retirement, rather than just focusing on their finances.”

Once the client’s goals are identified, they are then overlapped with their current financial position.

“We look at their overall finances, super and investments, and talk about the trade-offs they may be willing to make. This might be whether they would work for longer if it meant more holidays now,” explains Peter.

“From this, we build targets and goals. But these are not just financial goals like generating ‘X dollars per year’, they are also lifestyle goals. We work out things like the number of holidays each year, or how many days per week the client will work.”

The approach helps clients design a desirable lifestyle and retirement within the parameters of their current position. With this clarity, clients can track their progress towards their lifestyle and retirement goals, enabling them to make better decisions.

Discovering retirement goals

Uncovering a client’s aspirations means drilling deeper into their expectations for retirement and current lifestyle during the discovery meeting.

This is done using ‘what-if’ scenarios and questions to help the client tease out their underlying objectives. It can also unearth a desire not to fully retire, but merely slow down with shorter hours, or move in a different direction.

“It is usually not a healthy transition to go from 100 to zero in one step. Many clients are interested in taking on a ‘job of passion’ instead,” explains Peter.

“With one client, we found he had always wanted to drive a bus. So, that is his transition goal after a long professional career.”

Even for clients looking to fully retire from the workforce, lifestyle planning involves helping them think about how they will fill their days and what their partner or family may want from their retirement.

“Who will they play golf with if everyone they know is still working? Is their partner happy to retire at the same time? Do they want to spend time with you every day, or do they already have an established lifestyle? These are all questions and issues that need to be worked through with the client,” says Peter.

Moving into the lifestyle approach

Although many planners believe moving their clients towards lifestyle planning is challenging, White believes much of the groundwork has already been done. Popular money books such as The Barefoot Investor, have already highlighted the importance of long-term financial goal-setting, making client conversations easier.

At Abound, White is finding younger clients are increasingly open to these types of discussions, once they have paid off their home and are looking at what to do with their surplus funds.

“There are a lot more options and conversations you can have with clients if you start discussing issues, such as retirement, legacy funds or even ways to improve their current lifestyle,” he says.

On a practical level, the firm encourages new clients to complete and return the fact find prior to the first meeting, so the planner has time to identify their key focus areas.

“We include some prompter questions about non-financial goals covering areas like future holidays, working hours and support for their children, so we know what they are thinking,” says Peter.

During annual reviews, the presentation includes a slide on the client’s non-financial goal for the year, to check if they achieved it. “This is a trust building and personalisation tool we use, so clients can see we are not just interested in their finances, but also in their lifestyle.”

Business building opportunities

Although Abound Financial & Lifestyle Planning has been in business since 1993, ‘lifestyle planning’ was not introduced and incorporated as part of the practice’s name until 2006.

“It’s now part of what we do. Our clients are more engaged and they find the approach really helpful, as it adds real value,” Peter says.

The lifestyle planning approach has also proved to be a sound business strategy, with Abound only needing to undertake limited marketing activities, as new business regularly comes from client referrals.

“We find if clients have a positive experience, they suggest us to potential new clients seeking that approach.”

Lifestyle planning has also improved client retention and loyalty. “We barely lose a client, as they are not just a number for us. Clients see we are managing not just their finances, but also their lifestyle,” Peter says.

This style of advice also tends to be ongoing, rather than a one-off. “Even for existing clients who are moving to the stage of increasing frailty and immobility, we constantly take a lifestyle planning approach.”

The practice charges clients on a fee-for-advice basis and finds it well suited to this type of approach to financial advice.

“Another benefit is it helps you understand the scope of advice you will be providing to the client.”

White says there are still significant business opportunities to explore. “Aged care is a priority and is a growing advice area for us to build on.”

Encouraging younger clients to embrace lifestyle planning is also a priority for the business, as it allows the conversation to move away from the technical and investment aspects of the planning process.

“If you have a longer time span to retirement, there is less emphasis on contribution caps and investment returns. You can have really interesting conversations with younger clients about what they can do with their surplus funds.”

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10 tips for introducing lifestyle planning to clients

1. Undertake professional development courses to improve your interpersonal conversational skills.

2. Use ‘what-if’ scenarios to encourage a more in-depth conversation about retirement.

3. Don’t take responses at face value, as the client may not have considered other alternatives.

4. Take more time to listen than to talk.

5. Keep asking questions to open up the conversation into new areas.

6. Check and clarify your assumptions about the client’s retirement goals and desires.

7. Delve deeply into client responses and attempt to find out more about their goals and motivations using questions such as, “What else?”.

8. Develop prompters to use in discovery meetings that encourage broader thinking and responses.

9. Give clients time to uncover what matters to them and to raise questions, concerns and feelings with you.

10. Don’t rush to solve technical issues. Focus on unlocking resistance or procrastination.

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How to have lifestyle conversations with clients

Lifestyle retirement planning means really drilling down into a client’s goals, aspirations and desires – something that often requires the conversation to head into sensitive territory.

So, it’s important to ensure your interpersonal communication skills are top-notch and you know how to encourage clients to feel comfortable sharing personal information. Here are three tips to help with that process:

Ask open-ended questions

When it comes to retirement, it’s easy to fall into the trap of asking questions that contain your own assumptions and beliefs, rather than being open-ended.

Simply asking, “When do you want to retire?”, makes an assumption that the client does, in fact, want to retire. To dive deeper and open up the conversation, a better way to phrase the question could be to ask, “What do you want to do during your 60s, 70s and 80s?”.

Try using questions like, “Describe a thriving life in retirement”, as this style of question, because it does not assume the client’s financial resources are the key to a high-quality life in retirement. They also open up the possibility of other resources being used to meet the client’s retirement goals and aspirations.

Avoid close-ended questions

Asking questions that can be answered with a one-word response often shuts down conversation, instead of opening it up. Don’t ask when the client would like to retire, as it assumes the client wants to retire or must set a particular date. Often clients have not even considered that there may be other alternatives.

Similarly, asking “How much money do you want to spend in retirement?”, is more close-ended than a question like, “What type of activities do you want to spend your time on in retirement?”.

Use ‘door openers’

Broad questions, or ‘door openers’, can help clients think about possibilities they may not have considered. For example, a question like, “Can you talk about what you picture when you think about retirement?”, casts a wide net to gather both factual and emotional information from the client’s perspective.

Based on Moving from Financial Planning to Financial Lifestyle Planning, TIAA-CREF Institute, 2009.