Nerd's Eye View blog

8 Inflation Conversations For Financial Advisors To Have With Clients

April 27, 2022 07:01 am 1 Comment CATEGORY: Client Trust & Communication

With inflation reaching its highest levels since the early 1980s, the topic of rising prices has been on the minds of many financial advisors and their clients. And though many hoped that the spike in inflation that began in autumn of 2021 would pass within a few months (once holiday season demand cooled and COVID-related supply chain issues worked themselves out), it has instead persisted for longer than many originally predicted.

In the early days of this inflationary spike, the most common (and perhaps the best) advice for clients may have been to simply “wait it out”, since a brief rise in prices – uncomfortable as it may have been – was unlikely to have enough of an impact on long-term planning to warrant any drastic changes. But even though we are still a long way from the kind of inflation that plagued the economy in the 1970s and 1980s (when inflation averaged over 9% for a 9-year stretch), the continued rise in prices may have many advisors (and their clients) wondering if there is more that they can do to better position themselves for a prolonged bout with inflation.

One place to start may be to better understand how inflation is personally affecting each client. The headline Consumer Price Index (CPI) number that we see constantly represents an average inflation rate for the entire U.S. economy, but in reality, different households experience inflation in different ways depending on their lifestyle and where they live. Advisors can help clients calculate their own ‘personal’ inflation rate (and a downloadable template is included to make it easier to do so).

Another immediate way that advisors can help ease the impact of inflation for clients is to create a cash management strategy (i.e., a system for knowing how much cash to keep on hand and where to keep it) to avoid them having more cash on hand than is necessary (since, with interest rates on bank accounts so low, the excess cash is almost guaranteed to lose value to inflation even if inflation does fall back to pre-2021 levels).

Advisors can also address different ways clients can protect their savings for retirement and other long-term goals against inflation. The conversation could start with the one asset that is likely already in most clients’ portfolios: U.S. stocks, which have a lengthy track record of outperforming inflation over long time horizons. Additionally, advisors can discuss the role of TIPS in a portfolio (and answer some common questions such as whether it is risky to buy TIPS when inflation is at a multi-decade high, and whether it is better to buy TIPS directly or within a mutual fund or ETF). And because clients may have questions about other types of assets that are often associated with hedging inflation risk – such as gold, commodities, REITS, and, most recently, cryptocurrencies – advisors can help by discussing the actual track records of these assets to help clients make a more informed choice about how to strengthen their portfolios against persistent inflation.

There are other practical areas to give useful advice, such as tax planning (where clients might experience “bracket creep”, and therefore higher taxes, due to their income rising faster than the inflation rate used by the IRS) and property insurance (where, with construction materials and labor costs among the fastest-rising prices across the country, homeowners may find their existing insurance coverage is no longer sufficient to ensure the replacement value of their property).

Finally, advisors can ‘zoom out’ to the long view of clients’ financial projections for retirement, and address clients’ concerns about whether the plan’s existing inflation assumptions (which may predate the current inflation spike) are still realistic – and discuss how, when looking at the market’s expectations for future inflation in the form of the TIPS breakeven rate, investors still seem to be betting on a return to ‘normal’ inflation numbers after a short-lived increase. (Which bodes even better for clients’ plans given that investors have historically overestimated their inflation predictions!)

Ultimately, even though the goal of many advisors at the moment may be to encourage clients to continue to stay the course and avoid making rash decisions, there are still concrete ways that advisors can help clients better position themselves to withstand the current spike of inflation and improve their situation for the long term without drastically altering their existing plans. And even if this inflationary environment proves to be short-lived, the work advisors with their clients now can help them be better prepared for future unexpected increases in inflation – which, though we can’t control when they may happen, we can plan to help ensure they don’t get in the way of our clients’ ability to reach their goals.

#FA Success Ep 278: Separating Marketing From Sales To More Efficiently Scale Sustainable Growth, With Derek Gregoire

April 26, 2022 07:04 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 278th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Derek Gregoire. Derek is a co-owner of SHP Financial, an independent RIA based in Plymouth, Massachusetts, that oversees nearly $1.2 billion of total assets for over 1,200 clients.

What’s unique about Derek, though, is how he and his firm have centralized the execution of multiple marketing strategies to increase the amount of prospective client leads the firm provides to its advisors, so they in turn can concentrate more on developing client relationships (and not need to worry about chasing prospects).

In this episode, we talk in-depth about how Derek has built a combination of radio programming, short interview-style television ads, seminars, and digital marketing to bring in prospects, how Derek and his firm have developed a simplified three-meeting sales process that aims to avoid overwhelming prospects with choices and just focuses on whether they would like to work together, and how Derek’s decision to centralize marketing has ultimately freed up the budget to maintain a larger service staff to ensure a personal, high-touch experience for his clients.

We also talk about how Derek and his partners realized after getting close to burnout that it takes more than just advisors to scale and grow a successful advisory firm, why at one point Derek and his partners decided they had to spend a whole year doing less to get the firm back on track for long-term growth, and how Derek learned first-hand why having a good internal culture at his firm is what really helps advisors develop better and deeper client relationships.

And be certain to listen to the end, where Derek shares his philosophy of concentrating on the smaller details now to help with the bigger picture later, why Derek believes it is so important to be authentic and to have confidence in oneself (especially early in an advisory career), and how Derek’s long-term goal is not simply to have success but to achieve significance by pouring into others.

So whether you’re interested in learning about how Derek utilizes marketing funnels across a wide variety of mediums to drive prospects to action, how Derek’s firm culture changed for the better when he pivoted from employees who came for the paycheck to those who believed in the vision, or why he believes authenticity is the most important trait a young advisor can have, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Derek Gregoire.

7 Lessons Learned After Building A Fee-Only Financial Planning Firm From Scratch

April 25, 2022 07:05 am 10 Comments CATEGORY: Practice Management

Launching an RIA firm can be a rewarding experience for advisors who desire the independence, flexibility, and control of owning an advisory practice. At the same time, the process of establishing a new business can be daunting, especially when the firm is ‘truly’ starting from scratch with zero clients, revenue, or infrastructure. These challenges, along with the sheer number of priorities that must be addressed (e.g., choosing fee structures, identifying target client profiles, and developing marketing and lead generation strategies) – and the fear and uncertainty of making the ‘wrong’ decision – can keep many potential new firm owners from making the leap to starting their own practice.

In this guest post, Jake Northrup, CFP, CFA, CSLP, founder of Experience Your Wealth, LLC, relays some of the lessons he learned himself during the first three years of building his own fee-only RIA firm from scratch, to help advisors who are thinking about launching their own firms understand how they can navigate the early pitfalls of owning an advisory practice.

Many of the key business decisions in an RIA’s early startup phase revolve around marketing and selling the firm’s services. For Jake, having limited business experience prior to launching his firm made these elements especially daunting as he sought to attract his first few clients. But significantly investing early on in marketing (notably, creating a custom-designed website to clearly communicate his firm’s values and story) and sales training made it much easier for Jake to find and ‘hire’ the kinds of clients he wanted to work with most. Likewise, many individual firm owners will be stronger in certain areas than others, so finding and investing time and resources in areas that may need extra attention early on can be crucial to achieving a sustainable business.

But launching an RIA is not only a business decision, it is also a personal decision that can reshape many aspects of an advisor’s life. While offering the potential rewards of choosing where and when to work – and, with virtual planning becoming a more popular option, giving firm owners flexibility over where to live, regardless of where their clients are located – starting an RIA also comes with potentially significant risks. This is especially true given that firm owners must often tap into their own personal savings to keep it running, at least until the firm generates enough revenue to cover both its own business expenses and the owner’s personal expenses. For aspiring firm owners, then, understanding why launching an RIA from scratch is worth the risks to them – whether that be on account of their personal values, lifestyle preferences, or hard-wired personality characteristics that make them especially suited for running an advisory firm – is a crucial step in creating a practice that supports the ideal life that the owner wants.

Ultimately, what’s important to remember for aspiring advisory firm owners is that virtually everything about the firm – from its fee structure to its target niche and even to the owner’s long-term vision – can change. For Jake, what started in 2019 as a vision for a solo advisory practice quickly expanded to include an associate advisor, and since then has integrated a plan to build out a five-person team… all because his vision for the firm evolved based on wanting to spend more time on high-value advisory activities (and less time on other tasks that could more easily be outsourced). And while it’s important for new firm owners to plan out how the business will look and operate in its first few years, perhaps even more vital is to build in flexibility to account for how the firm’s vision will change over that time, especially since the flexibility to make firm decisions itself is often one of the main reasons advisors choose to start their own practice in the first place!

Weekend Reading For Financial Planners (Apr 23-24)

April 22, 2022 02:14 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the CFP Board increased its annual recertification fee by $100 (along with an additional surcharge of up to $19/year for CE credits). Representing the first annual fee increase since 2017, the additional funds will be put toward a range of initiatives, including public awareness, talent retention, diversity, and enforcement. But given the non-trivial nature of the increase, CFP certificants are likely to expect real outcomes from these initiatives!

Also in industry news this week:

Portfolio management giant Orion announced this week that it is acquiring leading advisor CRM provider Redtail in a deal that will bring Redtail’s large base of advisors into Orion’s orbit
Some industry observers think RIA valuations might have peaked, perhaps signaling a slowdown in M&A activity and increased viability of internal succession plans

From there, we have several articles on retirement planning:

Why the creator of the ‘4% Rule’ says retirees might want to reduce their spending given the current market and inflation environment
An analysis shows why the reduced benefits associated with annuity contracts with lower-fee Guaranteed Lifetime Withdrawal Benefit riders could make them inferior to their higher-fee predecessors (and why delaying Social Security could trump both in creating guaranteed retirement income)
Why it is important for advisors working with clients nearing and in retirement to go beyond retirement income and consider their clients’ social connections, health status, and plans for the various stages of retirement

We also have a number of articles on managing cash flow:

Why spending money on building friendships can pay dividends for one’s health and happiness
With statistics showing a significant number of individuals have engaged in financial deception with their partner or spouse, advisors can consider how to handle the financial and emotional impacts of these transgressions
Why clients in the wealth accumulation phase of their lives would be best served by finding ways to increase their income and putting money into the stock market as soon as it is available

We wrap up with three final articles, all about currencies and inflation:

Why cryptocurrencies might not have the inflation-prevention benefits touted by some of their proponents
Why a cryptocurrency skeptic argues that cryptocurrencies are primarily speculative assets rather than useful currencies and are unlikely to change the way we buy goods and services
How the ‘Cantillon Effect’ helps explain who wins and who loses from fiscal and monetary stimulus

Enjoy the ‘light’ reading!

Kitces & Carl Ep 84: How Do You Introduce Yourself If Not As A ‘Financial Advisor’

April 21, 2022 07:07 am 1 Comment CATEGORY: Kitces & Carl Podcast

Financial advisors have often been trained to perfect their ‘elevator pitch’ as a way of generating business development opportunities, and leveraging any social situation (even casual ones like a barbeque or a cocktail party) to prospect for clients. This approach created a long-standing negative reputation that financial advisors are only in the business to sell their ‘advice’ that purely serves their interests (and not necessarily those of their clients), ultimately ending with pushing their firm’s commission-based products on a consumer who may not even want or need the product. In more recent years, though, the term ‘financial advisor’ has progressed to refer to those professionals who are in the business to provide financial guidance and advice – not just sales products – and who are held to a higher fiduciary standard. Though there have been significant strides in changing what being a financial advisor means, this lingering sales-centric reputation has often made it difficult for financial advisors to introduce themselves (especially in more casual settings) as there can be an expectation that the elevator pitch is impending.

In our 84th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how lingering negative connotations of the label ‘financial advisor’ can impact introductions in social settings, how to change approaches to introductions and the relationships that follow, and when it is okay to shift the focus from prospecting for clients to simply talking to other people.

As a starting point, it’s important to understand that not all social settings are appropriate to prospect for clients. Once they introduce themselves, many financial advisors may feel pressured to immediately talk about how they can help the person with their finances. Even though many financial advisors genuinely want to do what is best for their clients and hold themselves to higher standards in the ever-changing financial advisory industry (and their own standards), those who may not be as familiar with the financial advisory world may have a difficult time discerning when they can trust the advisor, especially in light of negative media exposure (e.g., Bernie Madoff) that has tainted the reputation of the financial advisory industry. While an advisor may want to connect with others and have a genuine conversation about the good they do for their clients, the people with whom they are getting to know can feel biased by their negative impressions of financial advisors and may not want to engage in the conversation.

Ultimately, the key point is that there is no magic phrase or term to relieve the pressure an advisor may feel is necessary to defend what they do when introducing themselves as a financial advisor. Experimenting with different terms and descriptions, along with getting more specific as to what one does as an advisor (and clarifying who they serve), can connect the listener to more of the positive things and steer them away from the negative misconceptions about what a financial advisor does. For some, the stigma that surrounds the label ‘financial advisor’ won’t be dissolved any time soon, but by engaging in real conversations, advisors can attempt to at least change the perspective of those they interact with by simply focusing on creating better relationships (regardless of whether the goal is to prospect for clients)!

The RISA Framework: A Systematized Approach To Personalizing Retirement Income Strategies For Clients

April 20, 2022 07:07 am 19 Comments CATEGORY: Retirement Planning

As average life expectancy has increased over time, so too has the importance for retirees to ensure that they have sufficient income to cover their needs throughout what could be a 30-year (or longer) retirement. While some advisors may rely on a single ‘favorite’ income strategy to recommend to clients, recognizing that retirees actually have a range of preferences on how to source their retirement income can help advisors better develop sensible strategies that clients may be more inclined to follow. And the starting point for understanding a client’s income preferences to help them choose the right retirement income strategy is to identify the client’s retirement income style.

In this guest post, Retirement Researcher CEO Alejandro Murguía and Founder Wade Pfau share their recent research examining different retirement income styles that can be determined by assessing an individual’s preferences for growing and using their retirement assets. Their study identifies the two strongest constructs that help to determine a client’s income preference style, consisting of Probability (depending on market returns) versus Safety (sources of income less reliant on market returns), and Optionality (having flexibility to respond to economic developments or changing personal situation) versus Commitment (being dedicated to one retirement income solution). Together, these constructs were used to create a framework that can be used to identify an individual’s Retirement Income Style Awareness (RISA) profile.

For advisors, the RISA framework can be used to determine a prospect’s or client’s preferences, which can then help them design an appropriate and practical retirement income strategy. For example, an individual who expresses a preference for Probability and Optionality would likely appreciate the potential upside from strong market returns and the option to change course as necessary that are offered by a Total Return income strategy. Those who prefer Safety and Commitment may align better with an Income Protection approach, which would involve building a lifetime income floor with simple income annuities. And for those favoring Probability and Commitment, a Risk Wrap strategy (i.e., building a lifetime income floor with deferred annuities offering lifetime withdrawal benefits) could be more appropriate. Finally, those with preferences rooted in Safety and Optionality would likely appreciate a Time Segmentation strategy (e.g., bucketing strategies that use less volatile assets for shorter-term expenses, and more volatile assets offering higher growth potential for future expenses).

Ultimately, the key point is that by having a structured process around assessing retirement income preferences (whether by using a standardized RISA Matrix assessment or informally assessing where a prospect or client will be on the Matrix), an advisor can begin to develop a retirement income strategy that will most likely appeal to a particular prospect or client. By doing so, advisors can not only add value to current clients by ensuring that the client’s retirement income strategy matches their preferences, but can also attract new clients by offering a more personalized approach to generating retirement income!

#FA Success Ep 277: Crafting A More Unique Value Proposition By Investing Into A More Focused Clientele, With Lauren Oschman

April 19, 2022 07:04 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 277th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Lauren Oschman. Lauren is the CEO of Vestia Personal Wealth Advisors, an independent RIA based in Nashville, Tennessee, that oversees $600 million in assets for nearly 500 client households.

What's unique about Lauren, though, is how she and her firm not only serve a unique niche of physicians, but have also built practice groups within the firm that serve niches within the niche, including female physicians and orthopedic surgeons, and have developed hyper-specialized services for their unique clientele that allow them to truly differentiate.

In this episode, we talk in-depth about how Lauren and her partners built a firm dedicated to providing a high-touch, customizable client experience that still fits into the busy lifestyles of physicians, how Lauren’s firm developed services that help their physician clients with the unique challenges they face when it comes salary contract negotiations, and mortgages and disability insurance for doctors with highly variability income, and the way Lauren’s firm has further specialized in student loans and helping physicians understand when they may qualify for potentially six-figure Public Student Loan Forgiveness for their non-profit hospital work.

We also talk about how starting her career at a male-dominated advisory firm gave Lauren a better understanding of the importance of inclusivity and diversity for women advisors, how Lauren, immediately after having her first daughter, took a risk to leave the firm she outgrew and launch her own in order to pursue better leadership and ownership opportunities where she could have a much greater impact on change, and why Lauren believes learning to communicate and working on human connection as a financial advisor are equally as important as learning the technical skills in how to build a financial plan.

And be certain to listen to the end, where Lauren shares how she views the adversity she experienced in her career as learning opportunities and uses those moments as inspiration for her own future and for future generations in her firm, how building a team within her firm has helped Lauren feel more fulfilled by having more people around her that she can uplift and impact the lives of, and how, while Lauren is still striving to further improve the workplace that she has created, it’s looking back on how far you’ve come and how much you’ve achieved that really reflects the impact you’ve had on the world.

So whether you’re interested in learning about how Lauren integrates her “made for you” philosophy into her branding and marketing, how she simplified her fee structure to create scalability in problem-solving, and how Lauren fosters community and work/life balance with high demands on both sides, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Lauren Oschman.

Measuring The ‘Best’ Marketing Strategies And The Second Kitces Research Study On Advisor Marketing

April 18, 2022 07:07 am 3 Comments CATEGORY: Nerd's Eye View

One of the largest hurdles for many financial advisors is not in developing the technical skills to be able to give good advice to clients, but in learning how to engage effective marketing strategies that are essential to growing and sustaining a successful advisory firm. Unfortunately, this struggle to attract a critical mass of prospective clients to actually pay for an advisor’s services has resulted in a very high attrition rate in the advisory industry (as high as 70% in the first three years). Accordingly, there has been a great deal of attention on identifying the ‘best’ marketing strategies for financial advisors to help them grow their businesses.

However, there have been surprisingly few studies exploring effective marketing practices in the financial advisor industry over the past years. Which is why we launched the first Kitces Research Survey on Advisor Marketing in 2019, to identify the marketing strategies financial advisors are really using that work (or not), what tools, technology, and systems advisors use, best practices in the most popular advisor marketing techniques, and what advisory firms really spend on marketing (including hard-dollar marketing costs, tools and technology, and staff support). Our study revealed that, while some of the most popular marketing strategies actually being used by advisors were those that required a large investment of time (such as establishing relationships with COIs, social media, and other forms of networking), many of these popular time-based marketing strategies turned out to be among the least effective at using the firm’s resources (i.e., time and money) to generate new clients. Conversely, strategies with comparatively modest investments of time and dollars (like SEO strategies and paid web listings) were far less common among the advisors surveyed in the study, yet ended out having the lowest Client Acquisition Costs!

Accordingly, pursuing more resource-intensive marketing channels – that potentially involve both time and money – can be a worthwhile effort in helping advisors attract more clients (for instance, cultivating relationships with COIs with affluent client bases, which potentially requires many hours of an advisor’s time, could yield more high-net-worth prospects than less resource-intensive marketing strategies) by generating enough new revenue that makes the time invested worth the effort, even if they may seem less ‘efficient’ in terms of the acquisition cost per client than those requiring fewer resources. These considerations become increasingly important as an advisory firm grows in terms of clients and revenue, because the larger a firm grows, the more difficult it is to scale time-intensive marketing channels (like COIs and networking) with that growth, since the advisor’s time gets both more valuable and more scarce. Ultimately, investing into more efficient – and scalable – marketing strategies can be a key component of sustainably growing an advisory firm as it becomes easier to spend the resources on dollar-based strategies than on time-based strategies.

To dive deeper into the costs and efficiency of various marketing strategies, we are excited to announce the 2022 Kitces Research Study on Advisor Marketing, which will examine how advisors’ marketing strategies have evolved over the course of the COVID-19 pandemic and explore further what the fastest-growing advisory firms are doing to market themselves at scale. All advisors are invited to participate and help the advisor community better understand “What Actually Works In Advisor Marketing”– and hopefully gain some insight into how they can improve their own marketing efforts as well!

Weekend Reading For Financial Planners (Apr 16-17)

April 15, 2022 02:03 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that Vanguard is partnering with American Express to offer its Personal Advisor Services human CFP offering to AmEx cardholders, giving Vanguard access to a significant new base of potential clients (and combining low investment minimums with credit card perks to entice clients to hire Vanguard as their first – and perhaps only – financial advisor).

Also in industry news this week:

The SEC has issued guidance discouraging RIAs from using the term “fiduciary” to describe their standards of conduct on Form CRS, irking fiduciary advocates who believe RIAs should be allowed to highlight the differences between the standards that apply to them and those that apply to broker-dealers
The growth in RIA valuations may soon slow or even begin to decline, as Canadian financial conglomerate CI Financial is selling off 20% of its U.S. wealth management business in an initial public offering, which could raise newfound scrutiny of the prices they’ve been offering for RIA acquisitions and slow their demand.

From there, we have several articles on investments:

How I Bonds’ new interest rate will make them even more valuable for advisors and their clients in a world of high inflation
Why the rising interest rate environment is bringing a newfound focus on cash management for clients (from money market mutual funds to shopping banks for yield)
While bonds are often seen as a diversifier for equities in client portfolios, Treasuries have performed this function better than other types of bonds in recent years

We also have a number of articles on how advisors can communicate their value to prospective clients:

Why positioning financial advice as expert coaching to achieve a higher level of success – as a good athlete can use a good coach to reach an elite level – can help prospective clients better visualize the value of financial advice
Why justifying an advisor’s fees requires first understanding what a prospective client actually values in the first place, so the advisor can describe what they can do for the prospect in terms of what really matters to them
How advisors can create a brief and compelling value proposition that is consistent across multiple marketing channels (and can be expanded upon in conversations with prospects)

We wrap up with three final articles, all about email management techniques:

While instant messaging tools are often superior to email in the workplace, email can be a useful tool for personal correspondence and checking in with clients
How advisors can reduce the stress of dealing with emails that require complicated responses
Several methods advisors can use to spend less time dealing with email each day

Enjoy the ‘light’ reading!

Simplifying Retirement Income Planning Visualization Using The ‘Spending Risk Curve’

April 13, 2022 07:03 am 7 Comments CATEGORY: Retirement Planning

Retirement income planning is often one of the primary reasons prospective clients approach a financial advisor. In a world of increasing longevity and declining reliance on defined benefit retirement plans, being able to give clients an estimate of how much they can ‘safely’ spend each year, given their available assets, is a major part of an advisor’s value proposition. To do so, advisors often rely on Monte Carlo analyses, which provide the probability of a particular course of action being ‘successful’ (and, therefore, implying the corresponding probability of ‘failure’). However, the typical presentation of Monte Carlo results via a single probability-of-success outcome can make for a cumbersome process of guessing and checking plan results to get a sense of the range of plan outcomes for a client across different levels of spending.

A potential solution to ameliorate this problem and allow for easy comparison across various spending levels is to leverage technology to graphically display curves that relate a client’s spending levels with corresponding risk outcomes. These “Spending Risk Curves” can be far more insightful than a single probability-of-success result, and very useful for an advisor to gain a higher-level understanding of a client’s financial options by visually illustrating the trade-offs between a client’s spending choices and risk in retirement.

At their core, Spending Risk Curves show the trade-off between risk (framed in terms of probability of success or otherwise) and spending in retirement planning (i.e., as annual portfolio withdrawals increase, so does the spending risk level) based on a client’s particular circumstances (e.g., mixes of ages, longevity expectations, or Social Security benefits). In this way, Spending Risk Curves give advisors an idea not only of the full range of options for the initial risk/income levels, but, when combined with Spending Risk Curves at different portfolio levels, can also of the future adjustments to spending that might be needed (these could be to the upside or the downside, depending on portfolio performance) to keep the client at the desired risk level.

Ultimately, the key point is that Spending Risk Curves are highly versatile tools that can help advisors better conceptualize the range of outcomes associated with different spending levels for their clients, so that they can more easily design relevant and suitable financial plans. By understanding the full range of spending options at all levels of risk for a given client’s situation and being able to estimate future spending adjustments that might be needed to maintain a desired level of risk, advisors can not only give clients a more accurate view of their choices but also communicate what changes to spending might be needed down the line to keep their plan on track. In the end, this can lead clients not only to make better-informed decisions but also to have more confidence in their financial plan!