A prospect met with me last week with multiple goals, objectives and desires for his retirement, which, by the way, is to begin in eight months. After I dissected each one it became clear that there was no way he could achieve them all, or even half of them for that matter. I ran my retirement analysis, employing the Monte Carlo method for a balanced portfolio, which confirmed my initial belief.

The surprising thing was that he has employed two different "financial planners" and this was the first time he had heard that his retirement objectives weren't realistic. Amazing! His first reaction was that no one had ever dived deeply into his objectives. Then he said something that caught my attention. “The other planners have become good friends of mine; I'm surprised they didn't tell me.”

We in the financial advisory business are in the enviable position of having many of our clients become good friends. That's the good news!  The bad news is that it can often lead to a passive approach versus the “financial sheriff” they really need us to be.


Mom always said that honesty is the best policy but that isn't always applied when working with clients who are friends. No doubt, blunt discussions require a high level of trust and respect clients must have for you. However, if you're not the one to firmly tell them they need to save more, spend less, or work longer, then who will?

How do you become more proactive with clients who have become friends? Begin by having regular meetings with those you suspect are going to have difficulty attaining their objectives. I have quarterly meetings where all aspects of my client’s financial life are fully vetted and discussed. Thoroughly tear apart the client’s objectives and determine the real core costs associated with each.

For instance, if a client wants to buy a $500,000 retirement home in a warm climate, be sure they understand the amount of return they will be losing on the cash outlay, especially if they insist on paying cash for the home and eschewing a mortgage.  And, of course, there are the ongoing costs such as home owners insurance, association dues, flood insurance (if in a hurricane or flood zone), utilities, capital and operating assessments, etc. 

At the end of each meeting, review the necessary steps the client needs to take and by when. You can also give clients who are friends a gentle, confirming nudge during post-golf beverages or while enjoying a ballgame together.  Statements such as, “I’m looking forward to playing way more golf together when we’re retired. Let’s both keep plugging away with our savings and we’ll have more comfortable retirements.”

Secondly, I would suggest using a reliable, yet very understandable, method of calculating the probability of retirement success/failure. We use a Monte Carlo simulation to give us a fair idea of the different permutations of possible returns versus a static return, of say 6% or 7%. If a client understands the process they have a much better chance of “buying into” its success.

In the event the client is facing a shortfall due to inadequate returns, then make the necessary changes to the investments and possibly their asset allocation and start anew. 

In conclusion, comprehensive analyses throughout the years and the necessary, honest discussions we must all have, can result in a comfortable retirement for our friends, who just happen to be our clients!

Charles L. Nemes is a senior vice president with Nemes-Rush Private Wealth Management of Raymond James, Novi, Mich.

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