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Saving Clients From Themselves

Talking with your financial advisor about your savings is a little like talking to your doctor about your weight—you tend to fudge the numbers a bit.  According to a new study from the Principal Financial Group, 65 percent of advisors say clients stretch the truth about living within their means and 44 percent say clients fib about how much debt they carry.

But the biggest challenge, says Tim Minard, Principal’s senior vice president of distribution, is not discovering clients’ little white lies—it’s getting clients to act.  Human nature, not other financial professionals, is the biggest source of competition advisors face, the study found.

About 80 percent of clients cite financial security in retirement as their top financial dream, according to the study, but a majority of advisors say clients rarely begin saving early enough to accomplish their dreams. “Even small actions can result in financial success over time, which is why it’s critical to engage an advisor and start financial conversations early and often,” Minard says.

On average, advisors suggest clients save 17 percent of their annual pay—a number that’s been slowly increasing from the industry standard of 15 percent. Gen X advisors are even more likely to feel that clients should save more than Baby Boomer advisors.

But even the best savings plan can go bust if clients don’t stay on track. Advisors need to monitor clients’ spending habits as well, as clients’ top blunder is living beyond their means, followed closely by not saving enough, according to advisors surveyed.

How do advisors’ keep clients on track? Like doctors' scarily accurate scales in the office reveal the truth, advisors need to show clients their blind spots at every opportunity. And talking to the wife may yield better results. A third of the over 600 advisors surveyed found that women are more likely to take financial advice. 

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