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Client money mistakes: unrealistic goals

May 2017

Cathryn Gross believes clients are motivated when given achievable goals, writes Alan Hartstein.

Cathryn Gross says there are two mistakes people make with money, time and time again. The first is they have no idea where most of it goes because they have no budget.

“This means they are spending without thinking about it and wondering why they are never getting anywhere,” she says. 

The second mistake involves setting goals that are so unrealistic that they invariably end up doing nothing. Once you convey to clients that they have to do something and that their goal really doesn’t have to be that far down the track or so lofty, they tend to at least take some action, she says.

“If, for example, someone is in their 30s or 40s and doesn’t have a house yet they’ll say, ‘I’ll just never be able to afford it, I’ll never be able to repay my mortgage.’ However, if you can show them how, by saving $10,000 or $20,000 a year, they can get a deposit together within three or four years, they are much more encouraged,” Gross says. “So the first thing I do is work with them to set a realistic budget and then start tracking their spending.”

Gross, who founded boutique agency Twelve Wealth in Sydney’s Martin Place after an extensive career in banking and financial services, was a finalist in the 2016 AFA Rising Star Award. Her main areas of expertise are in cash-flow management, superannuation, insurance and property financing.

From little things, big things grow

Gross says it’s vital for clients to know what they want and if you give them small goals that are relatively easy to accomplish they gain more belief in their ability to achieve the larger ones. “I put them in the headspace where they can do things then give them the framework to do them,” she says. “Put simply, little things lead to bigger and better things.”

Gross meets with her clients quarterly and runs through profit and loss predictions to see how the budgets they have jointly arrived at, and their investments, are progressing. “If they are struggling to stick to that budget, we work through their situation to find out why and come up with new, shorter-term goals to get them back on track before the next quarterly meeting.”

Rectify mistakes when they’ve been made

Gross says it’s imperative to discuss with clients the impacts of their decisions and what it was that drove them to do those things in the first place – was it emotional, environmental, or habitual? She then discusses strategies to prevent them doing them again.

One example Gross cites is clients of hers who are divorcees. They may receive a large settlement but don’t have a clue about what their cost of living will be when they start living by themselves. The settlement gets slowly but surely frittered away because they have no budget in place to control their spending.

“Often inaction is the biggest mistake people make when they feel helpless, so you have to show them how to spend and save their money for it to last however long it needs to and get them to reduce their spending accordingly. This is often easier said than done but helping to define their strengths and getting them really focused with a savings plan is something they feel empowered by.”

The right tools for the situation

Apart from her regular quarterly face-to-face meetings, Gross likes to stay in constant contact with her clients. “I talk to them all the time, either on the phone or via email or Skype. We discuss everything we would in a face-to-face meeting like what’s gone well and what’s changed, but also about something more specific that might be troubling them at the time,” Gross says.

She also writes a quarterly newsletter and regularly shares articles she finds interesting with her clients on Facebook and LinkedIn.

Gross’s favourite client tool is Xero Cashbook which she says is essential for clients who are cash-flow focused. “I get them to put the app on their phones to regularly reconcile their spending and it works wonders. Not only is it a brilliant budgeting tool, it can also auto allocate spending for various items.”

Gross also likes Adviserlogic’s cash flow and retirement goal calculators, which are “user friendly and provide clarity for goal setting”. She especially likes those calculators for her face-to-face meetings, which she uses in conjunction with Xero Cashbook.