A remarkable 41 per cent of employees worldwide are considering leaving their employer this year, according to Microsoft Corp.’s Work Trend Index survey. For financial advisors, it’s likely that at least some of their clients will be joining what’s being dubbed “the Great Resignation.” That’s creating a pivotal role for advisors in ensuring financial plans stay on track when clients give their notice.
The reasons for this rising trend are various, but at the heart of it, some may be feeling more confident about the job market and considering switching positions or careers, while others may be fed up after more than a year of workplace uncertainty and looking at early retirement.
“I think people are craving change right now,” says Andrea Andersen, an advisor with Edward Jones in Calgary who confirms that client conversations about quitting are picking up speed. “What COVID-19 has done is it has really made people desire to connect to their purpose, and for some of those people, they’re saying, ‘This career doesn’t have any connection to my purpose.’ … [Also,] I’ve had clients come in over this last year and say, ‘I know I said that I was going to retire at 62, but I’m 57 and I can’t do this anymore.’”
Ms. Andersen’s personal experience in changing careers informs her discussions with clients. Fifteen years ago, she left teaching to become an advisor and had to wrestle with some of the same issues her clients now face, from assessing the cultural fit of a new organization to accepting the loss of a secure pension.
When clients raise the question of quitting, she always asks, “Are you running to something, or are you running away from something?” Running to something generally leads to a better decision, she says – but, of course, there’s much more to it than that.
“When decisions are not made thoughtfully, then it really can throw a financial plan into a tailspin. If you don’t have an emergency fund, then walking into your boss’s office and saying, ‘I’m out of here,’ that affects today … if you can’t pay the bills,” she points out.
So, the first thing she checks when talking to clients who are poised to quit is the health of their emergency fund. She wants to know, “Where can we get funds to hold you over until you can find another job if you feel you need to make the switch today?”
Then, she runs the numbers to calculate the effect that leaving a job will have on a client tomorrow. Specifically, she helps clients figure out what salary and benefits they need from a new job so they can still meet short-term goals like travel and long-term goals like retirement. Sometimes, clients are willing to give up some of their goals to buy flexibility and free time, and she says that’s fine as long as they go in with their eyes open.
For those who want to retire early, Ms. Andersen explores alternatives such as working part-time in a lower-stress job to keep covering expenses for a few years before starting to draw on retirement savings. She sees it as her job to present options and then let clients make well-informed choices.
“I always tell my clients, ‘I’m the [chief financial officer] and you’re the [chief executive officer].’ I give you all the information. You make all the decisions,” she says.
Janine Purves, senior financial advisor at Assante Capital Management Ltd. in Richmond Hill, Ont., says there’s “definitely” more chatter about quitting among her working clients and among her retired clients’ adult children.
Much like Ms. Andersen, she explores the reasons underlying her clients’ desire to leave a job and encourages them to think about what they want beyond the immediate change.
She often discovers that clients aren’t making realistic assumptions, especially if their plan is to take a job with a lower salary or start up a business. They may believe they can withstand a dip in income because they haven’t been spending as much over the past year while places where they usually spent money were closed. However, she asks them what they will still be willing to give up as life gets closer to normal.
Similarly, clients who are hoping to retire early may assume they can live on a lot less when they stop working. But while some expenses may diminish post-retirement, she reminds them that they will suddenly have eight extra hours a day to fill with activities that may cost money. They will also have many more weeks available for potentially expensive holidays. Ms. Purves adds that people often overestimate how much their habits will change in retirement.
“By the time you retire, your habits are pretty ingrained, so if you’re not a cook and you love to go out for dinner, you’re still going to love to go out for dinner,” she tells clients. “Let’s think about what you picture as your day in retirement, and then let’s go back and see what that might actually cost you … It’s not always less.”
Whether clients are changing jobs or retiring, Ms. Purves says it’s important to ask whether it’s possible to continue benefits coverage through their current provider.
“If you don’t take advantage of that right away, sometimes you might not get that coverage because you have pre-existing conditions and they’ll be exempt. It’s a small thing but it can really matter,” she says.
Ms. Purves says it’s also critical to run a worst-case scenario so clients know there’s a plan to manage bumps in the road.
“Having a few specific cash-flow strategies is so critical for people, from a psychological and a financial standpoint, to get through some of those challenges,” she says.
In the end, clients’ life shifts – including leaving their jobs – can be an opportunity for advisors to deepen relationships, Ms. Purves says.
“If somebody can help you walk through that by asking all the questions, because you’re not thinking of every angle, that’s half the battle [to] enhance that success rate so that in 12 months or 36 months, [you can say] ‘That was the best move I ever made – but if I hadn’t thought of this ahead of time, it might have been a lot harder than it was.’”