When Is Enough Enough?

Most of us understand that any fiduciary conversation with clients needs to be built around a thorough understanding of the client’s intentions, but there’s more. What are their dreams, priorities, and core values? Do they need a plan to spend most or all of what they’ve accumulated during their life expectancy so they can enjoy a certain retirement lifestyle? Or do they dream of leaving a legacy of financial security for their heirs? Is their deepest wish to provide a significant gift to fund a cherished cause that will live on after their passing?

Only by engaging with our clients at this level will we be able to help them answer the basic question: How much is enough?

Knowing when “enough is enough” speaks to an emerging change in how people view wealth. In the most recent Charles Schwab Modern Wealth Survey, respondents indicated that a net worth of around $2.2 million was enough to be considered objectively “wealthy.” But more significantly, when asked if they “felt rich,” 48% of respondents answered in the affirmative – even though their average net worth was only around $560,000, or about a fourth of what they said it took to be “rich.” How to account for the variance? The most popular explanation for respondents’ feelings of wealth (given by 40%) was “well-being.” This answer was given more frequently than money (32%) or assets (27%). And a clear majority – 62% – said that healthy relationships with loved ones was a better description of wealth than having lots of money. Most important was that 70% said that having real wealth means not needing to feel stressed about money, rather than simply having more of it.

That sense of contentment – of well-being – is the best indication of knowing when “enough is enough.” So, how do we talk about that with our clients? How can we help them visualize reaching a place of well-being with their wealth – when “enough is enough”?

How to know you’ve arrived

It all starts with communication around alignment: making sure that the plan we build with the client is designed to accomplish what matters most to them financially, socially, culturally, and emotionally. But there are some practical considerations, too – measurable, quantifiable markers – that we can use to give clients the reassurance that helps them have the right relationship with their wealth.

For example, when clients say, “Can we afford to retire?” they are really asking, “Will our money last long enough to pay for the lifestyle we want?” Many clients, however, don’t have a good grasp of how much that lifestyle costs. So, we can help them put a number to the lifestyle they desire, both presently and projected into the future, allowing for inflation and likely changes in health, mobility, etc. In my experience, when I do this work with clients, they will often underestimate costs, have little to no idea of what their actual costs are, or say that a given year’s costs are artificially inflated because of “one-off expenses.” My usual reply to this last comment is to remind them that almost every year is going to contain at least one “one-off,” and it’s better to plan accordingly.

The other important conversation is helping clients understand the need for their wealth to continue to grow for the long haul. Many will look at the current life expectancy in the US (76.4 years, according to the latest figures from the CDC) and assume that they’re only likely to need 10 or 12 years of income, at most, in retirement. But that isn’t the real picture, since these figures include everyone who dies, from infancy onward. Once a person has reached retirement age, the life expectancy tables shift, as can be seen by looking at the actuarial tables used by the Social Security Administration. A male aged 65, for example, is statistically likely to live another 16.94 years, and a female of the same age can likely expect to live another 19.66 years. Not only that, but according to the National Institutes of Health, current government actuarial assumptions may be underestimating actual lifespans. In other words, we need to help clients understand that they need to be planning for 90- to 100-year lifespans. This means that the “current wisdom” of getting more conservative with portfolio construction as they near retirement may not be in their best interests, if they want to effectively fund a certain lifestyle for the length of their retirement years. They need to understand the concept that “predictable” isn’t necessarily the same as “safe.” So, to know when “enough is enough,” clients need to have a realistic understanding of how long they are likely to need their money to work for them.

The more we help clients clearly understand what is needed to accomplish what is most important to them, the more likely they are to accept when “enough is enough.” But we must be prepared to coach, explain, clarify, and quantify the goal in terms that make sense to them. When we can help them arrive at a place of well-being and contentment in their financial affairs – and provide objective evidence – we can say that we’ve done “enough.”

Julie Meissner is a founding partner and CEO of Treehouse Wealth Advisors, where she leads strategic growth, client engagement and advisor development. She is focused on helping both clients and employees on their path to create and live a meaningful life. Julie created Treehouse Wealth Advisors to establish a firm that empowers clients to invest their time and assets purposefully and employees to inspire one another to reach their full potential. Julie received her CRCP designation through The FINRA Institute at Wharton.

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