How to Retain Retirement Planning Clients – For the Long Term

The latest AICPA PFP Trends Survey, a quarterly poll of CPA financial planners, yielded interesting insights into the impact of strong client relationships.

This year’s market fluctuations could have really thrown clients into a tailspin of concern about their retirement savings and resulted in them making impulsive decisions about leaving the market. Despite the market volatility, a majority of CPA financial planners’ clients exhibited resolve, with only 16% of their clients contacting their CPA with concerns about getting out of the market. The survey quantified the impact of specific reasons for this tenacity, including client education, age and their relationship with their CPA financial planner.

You can have an impact on your clients’ anxiety, or lack thereof, about market fluctuation and long-term financial planning. According to the survey:

Exposure to a CPA financial planner positively impacted their clients’ response to market swings. Clients who have a long-term, more established relationship with their CPA were more confident than new clients. The scale of 1 (fearful) to 5 (confident) has more established clients rating a 3.6, with newer clients feeling slightly fearful at 2.5

Furthermore, clients who were educated about the market rated their confidence level at 3.4 versus 2.4 for those with little interest or knowledge.

What does this mean for your practice? Your clients’ trust in you makes a huge difference and in turn causes them to trust the investment strategies the two of you have come up with. Establishing and building that trusted relationship should include educating clients about market trends and patterns.

The survey reinforced expectations on the impact of age on confidence levels: primarily that ratings for clients approaching retirement (2.4) or newly retired (2.3) were most likely to be more fearful. Focusing your education on these groups in advance can minimize these fears during significant market fluctuations.

In addition to educating clients regarding market trends, CPAs should also educate their clients about how much money they will realistically need in retirement. Consider that clients typically underestimate their financial needs based on these three areas, significantly increasing the probability of unmet retirement expectations:

Life expectancies. According to the survey, 52% of individuals underestimate how long they will live, and 57% of couples underestimate their combined life expectancies. People are living longer and longer, with the likelihood of living into their 90s increasing; yet many people don’t recognize the impact of age trends when they plan for retirement.

Total funds to require. If clients are underestimating life expectancy, it’s no wonder that they underestimate the total funds required to retire. CPAs estimate that 54% of clients underestimate their total funds required to retire. You can play a key role in helping your clients envision what they want their retirement to look like and more realistically identify the funds needed to make it happen.

Spending habits change in retirement and the survey showed that 57% of clients typically underestimated these expenses. Whether traveling, gifting money to family members, or paying significant healthcare costs, guiding clients through realistic plans for unique and changing living expenses is important to helping them meet their goals throughout their retirement.

Motivating Client Change

When asked how they motivated their clients to make adjustments in their spending or retirement planning, CPA financial planners responded that motivating clients to make spending changes is challenging, but there are a variety of factors that can speed change along.

External factors forcing a change: Changes in health (96%) and a job loss (95%) ranked as the two highest motivators.

Important decisions facing the client: Pending planned retirement (83%) and helping family members financially (77%) are big decisions that often motivate clients.

Conversations with their advisor: At 78%, this was also a top five motivator. As their trusted advisor, focusing your conversations on these other factors can increase the probability they will embrace the necessary changes to meet their long-term goals.

For Your Practice

CPA financial planners can have a huge impact on ensuring their clients stay the course to meet retirement goals. Frequent conversations to build trust, ensuring they are on track, and educating clients on market trends and why adjustments are needed along the way can make a huge difference.

Be sure to visit our PFP Trend Survey website for more information, where you’ll find a summary of results, a survey video and other resources. We’ll add more survey results throughout the year, so check back for updates.

Additional resources on retirement planning with your clients can be found in The CPA’s Guide to Practical Retirement Planning located on the retirement resources page of the AICPA’s PFP Section website (aicpa.org/pfp).

What changes can you make to influence clients regarding their retirement planning?

Dan Snyder, CPA, Senior Technical Manager-American Institute of CPAs.

Retirement plan courtesy of Shutterstock.

How to Retain Retirement Planning Clients – For the Long Term

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