Understanding the Life-Cycle Approach for Your Clients

Life cycle financial planning is a multi-stage approach to helping your clients build and manage wealth. As clients age and experience life changes, their financial goals and needs may evolve, which in turn can affect the type of advice you offer. Understanding the financial planning life cycle can help you prepare for each new phase in your client’s journey.

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What Is Life Cycle Financial Planning?

Life cycle financial planning is an approach to financial planning that encompasses a client’s different life stages. The decisions people make with their money can look quite different at 62 vs. 22, and a life cycle strategy is meant to account for that.

Why would it benefit an advisor to think about financial planning in life cycles? The short answer is that it can help you better understand what your clients may need at a particular moment in time. Different life stages can present different struggles or challenges that require unique solutions.

Breaking a client’s financial plan up into “snapshots” of time also makes it easier to look ahead, while giving you room to pivot the advice you’re offering should a major life change occur. For example, you might have a client in their mid-40s who thinks they have their financial plan finally figured out only to be dealt a curveball in the form of a divorce.

A life cycle planning approach can help you grow your business if you’re equipped to work with clients who face a broad range of challenges. It’s also an opportunity to deliver a better client experience through personalized advice that mirrors where each client is in their life cycle at any given time.

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Financial Planning Life Cycle Stages

A financial advisor discussing different financial planning stages for a family.

The financial planning life cycle can be divided into five stages, starting with young adulthood and ending in retirement. Here’s how each stage works for financial planning.

Stage 1: Early Adulthood (Ages 18 to 25)

Early adulthood can encompass the teenage years through college, and this is when most people begin to have their first experiences with managing money. Your target client base may not be 20-somethings, but it’s helpful to understand the kinds of issues this age group faces, as they may continue to carry some of those issues into later life stages.

For example, a 25-year-old who’s graduating with $100,000 in student loan debt may come to you 10 years from now, in need of a plan for how to pay off the last of it so they can buy a home. Or they may have neglected saving for retirement up to this point and need a plan for getting caught up.

If your client base includes young adults, you may be starting with the basics to help them build a financial plan. That can mean helping them develop a budget and a plan for saving, as well as a plan for paying off education debt. You can also introduce them to investing, though they may not have a lot of disposable income to invest just yet.

Stage 2: Mid-Career (Ages 26 to 45)

The second stage of the financial planning life cycle typically centers on adults moving into their 30s who are preparing to get married and/or have children, or have done so already. At this stage of life, financial needs may shift away from debt repayment and towards saving and investing for retirement. College planning may also be of concern to clients who have young kids now but don’t want to be caught off-guard by high tuition costs 15 years down the road.

Clients in this life stage may be on the cusp of their peak earnings years and accumulating more assets. They may be primed to expand their investing efforts beyond their 401(k) and explore taxable investment accounts or the possibilities that real estate may hold.

They may also need advice on how to protect the assets they’ve acquired so far. This is a suitable time to discuss life insurance planning and what kind of policy might best fit their needs.

Stage 3: Peak Earning Years (Ages 46 to 54)

This stage is when clients may be hitting their mid to late 40s and seeing their earnings climb. Ideally, clients have paid off their consumer debt, excluding their mortgage, and are focused on saving and investing to build wealth. That isn’t always the case, of course, and you may be working with clients who are behind on saving for retirement or have yet to get started.

The good news is that if clients are in their peak earning years, they may have more financial resources to commit to reaching their goals. At the same time, they may be wondering where college planning is going to fit into the picture if their kids are approaching college age, as they continue to fund their retirement goals.

Your job during this stage is to help them prioritize what’s most important and identify the potential gaps in their plan that might leave them with a shortfall. For example, if they’re contributing to a 401(k) but are still off target for their retirement savings goal, then you might need to tweak their plan to either increase their contribution rate or add in an individual retirement account (IRA).

If they’re considering taking out student loans for their children, that’s an important discussion to have. Making payments to federal or private student loans for another decade or more could significantly impact their ability to save and invest.

Stage 4: Pre-Retirement (Ages 55 to 64)

The pre-retirement countdown usually begins in the early 50s, though it may come even sooner for people who are hoping to retire well before 65. At this stage of life, your clients may need advice on things like choosing the right retirement age, deciding when to take Social Security benefits and planning for long-term care needs.

Clients may be maxing out their workplace retirement plans or IRAs or wondering when they can begin taking distributions from those accounts without a tax penalty. They may be eyeing their investment portfolios and asking themselves if it makes sense to shift into a more conservative asset allocation.

This is also the time when they might be considering purchasing a long-term care policy or an annuity to provide a guaranteed stream of income in retirement. They may look to you to help them assess their needs and find the right products to fill them.

Stage 5: Retirement (Ages 65 and Beyond)

Retirement for most people usually happens in their 60s, though you might have clients who plan to retire later or earlier. By this stage, most of the work of building wealth has likely been done so now the focus is on preserving it and/or passing it on.

For instance, clients may be wondering how to draw down taxable and tax-advantaged assets to ensure they last while minimizing what they pay in taxes. Clients may also be concerned with estate planning and how to pass on assets to their loved ones in the most tax-efficient way possible. They may need to update their wills (or draft one if they haven’t yet) and set up one or more trusts.

And you might have clients who are dealing with an entirely different situation. For instance, you may work with a couple who’s planning to retire on a cruise ship or an individual who retires and then decides they’d like to start a business or set up a private foundation. Keeping the lines of communication open can ensure that whatever they decide, you’re prepared to help them execute their plan.

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Adopting a Life Cycle Planning Model

Understanding what clients need in each life cycle phase is a good place to begin if you’re interested in incorporating this approach into your business. The following tips can help you implement life cycle planning in a way that’s scalable and sustainable.

Update Service Offerings

Look at your current offerings to determine how adequate they are in meeting the needs of life cycle planning clients. For example, are you covering the key bases of risk management, investment management, retirement planning, tax planning and estate planning? If not, consider how you could develop new service offerings to fill the gaps.

If you don’t have expertise in a particular area of financial planning, consider how you might address that. Options include pursuing a professional designation or credential that allows you to gain the necessary knowledge, hiring another advisor to join your firm or cultivating centers of influence that you could refer your clients to.

Bundle Services and Utilize Tech

Creating service bundles can help you serve clients more effectively if the bundles you offer are tailored to specific segments of your book. It also encourages uniformity in how clients are served across all touchpoints within your firm. You can reinforce that uniformity by using technology to create automated workflows and processes to handle various aspects of client service.

Consider how your current tech stack reflects your ability to implement life cycle planning strategies. If you use financial planning or investment management software, look at how each one accounts for different client life stages and their related risk scenarios. Beyond that, think about what clients may want from tech solutions at different life stages. For example, clients may be more inclined to work with you if you offer a secure portal or dashboard that allows them to view their accounts as they move through different life stages.

Refine Your Marketing

If you’re pivoting into life cycle planning, your marketing strategy may need some tweaking to reflect that shift. For instance, you might want to review your messaging to better emphasize the life cycle planning services you offer, or highlight your unique value proposition in this area.

You may also need to rethink the lead magnets you offer, the content you share on your blog and social media accounts and the type of content you include in your email newsletters. You don’t need to throw the foundation you’ve already built out the window, but you may need to update some of the messaging to make it clear to current clients and to prospects that you’re now a life cycle planner.

Review Pricing

You may need to revisit your fee structure when making a shift into life cycle planning to ensure that you’re delivering value to your clients, without shortchanging them or your business. For example, if your pricing has exclusively been AUM-based in the past, you may choose to add a la carte pricing or retainer fees. Expanding the range of pricing options could allow you to serve a broader base of clients with different life cycle planning needs.

Bottom Line

A financial advisor working with a senior couple on balancing their retirement portfolio.

Getting to know the financial planning life cycle benefits both you and your clients if you’re offering them the right advice, at the right time. If you’re able to serve clients well in the earlier life cycle stages, they may be more inclined to remain clients as they move into later life phases.

Tips for Growing Your Advisory Business

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If you’re interested in a career in financial planning, you may consider obtaining a CFP® mark. This is the official designation that signifies someone is a Certified Financial Planner. Becoming a CFP means having the necessary education and work experience, as well as completing the CFP exam.