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When doctors see you gaining weight, they can’t make you change your eating habits. They can only nudge you to shape up. The same goes for financial advisers who see you spending beyond your means. They can’t force you to stick to a budget. They can only prod you to think about how you save and spend, and to consider the consequences of your actions.
“Nagging doesn’t work,” said Michael B. Hansen, a certified financial planner in Walnut Creek, Calif. “At the end of the day, you can hear the client saying, ‘Hey, it’s my money. I can do anything I want.’”
That leaves advisers with a menu of options to persuade spendthrifts to cool it. The most obvious strategy is to remind clients why they hire an adviser in the first place.
“You’re paying me to help you stay healthy, financially,” an adviser might say. “Part of my job is making you aware of when you endanger your financial health.”
In these situations, an adviser becomes a kind of accountability partner — a coach who spurs a spender to avoid breaking their budget. Both parties know their role.
But that doesn’t always succeed. Clients may still resist authority, even if they’re paying that authority figure for advice and expertise.
Another tactic to stop people from spending too much is to step back and focus on the big picture. Advisers try to put short-term spending into a long-term perspective. In his first meeting with new clients, Hansen likes to ask, “What do you want your legacy to look like?”
The discussion then turns to the individual’s most cherished values. This sets the stage for subsequent concerns tied to overspending. Hansen reminds them of their stated values and adds, “If that’s still important to you, I suggest you rein in the spending.”
“Usually, that works well,” he said. “We go over how they want to be remembered. Then they say, ‘I’ve lost sight of that recently.’”
Raising client awareness of their spending is instructive in itself. Many people operate in a vacuum, not realizing how they deploy their funds and how much they waste on fluff.
“Tracking your spending is important,” said Kelli Send, co-founder and senior vice president of Francis LLC, an advisory firm in Brookfield, Wis. “It’s downloading all of your transactions to see where you’re spending your money. That’s surprising to many people. They may not pay attention when they use their credit card.”
Attentive advisers also identify who might influence a client’s spending decisions. For example, a big spender may be trying to keep up with materialistic colleagues, friends or family members who acquire expensive toys.
Experienced advisers also know to avoid “should statements.” Telling someone, “You shouldn’t have bought that” or “You should be more disciplined” tends to trigger defensiveness, not compliance.
“You don’t want to say, ‘You need to cancel that streaming service,’” Hansen said. “You want them to conclude for themselves versus telling them what to do.”
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