Remember when you first started in the industry and your manager reviewed the importance of having an accurate account of your clients’ monthly and annual expenses? How else could you calculate their retirement income needs with any of precision?

If you are like me, you didn’t have quite that experience in your “new advisor training” — or “new man school” as I recently heard it referred to by a colleague. You were probably told an arbitrary number like 70% or 80% of pre-retirement income was sufficient.

If you look at many “needs assessments” or “financial fact finders,” you’ll not see many spaces for expenses. I know, I know, there are a few — but they are only a few.

Your clients are confused about what is the “right” answer too. A few articles I recently read in MoneySense and Canadian Business stated that most Canadians would be comfortable with between 50% and 60% of pre-retirement income.

The articles went on to say the only reason advisors recommend a greater income need is for our own benefit. Yes, that’s it; those dastardly advisors trying to make clients attain 80% of pre-retirement income — pure evil genius, if you ask me.

You can put client’s questions and concerns to rest by looking at their specific situation, rather than some industry standard guess.

How do you calculate how much is enough? It’s complicated and unique to each individual, but I think it starts with understanding the type and amount of your client’s expenses.

Remember, your clients aren’t investing because they were enchanted by the name of a particular fund, or because your company’s advertising was so darned great. They didn’t just have to have the product you sold them.

Our clients save for retirement for one simple reason: so they can enjoy the fruits of their labour. They need to be able to count on their assets paying them an income. What do they do with the income? Pay expenses, of course. And how can you possibly be accurate in your calculations if you don’t know how much they spend, and on what? You can’t.

Personally, I think you should know your client’s expenses no matter where they are in relation to retirement. But that’s just me. I think this stuff is important. I think this stuff is why your clients came to you in the first place. They don’t care about the product or the fund. They care about what you and your products do for them.

It’s all about what they get back for their efforts earlier in life. Once they are in that retirement risk zone, I think it is our responsibility to know all about their expenses.

I mentioned in my last column about Product Allocation that over 60% of Canadians have no pension — 60% of people will have to fund their own retirement. We haven’t even seen the masses of these DIY retirees yet — they are still approaching the horizon.

Very few clients who are currently retired are relying entirely on their own assets to pay their basic living costs. In the past, advisors were often in charge of the vacation fund or a family nest egg, destined to be an inheritance.

This will not be the case for the next generation of retirees. For the 60% who must self-fund retirement, we advisors hold in our hands their very survival. We are not the custodians of the cruise fund anymore. We have been entrusted with their life savings.

This is the money that has to keep them warm, fed, clothed, safe and happy for the rest of their days. We have to help them keep the tap on the bucket from being opened too wide. Once they’ve opened that tap, they won’t like the idea of going back to work to fill the bucket back up.

So if you run a busy practice already, or you feel that you are just swamped or even if you just don’t really want to add more steps to your process, I say do it anyway, but make sure your clients help.

There are a few online tools you can use to get clients to gather up expense info, but I’ve found one of the easiest to use is an expense worksheet that can be found on I mentioned it in my last column. It’s got a PDF version of the expense sheet that you or your assistant can email to a client prior to their appointment. You or your assistant can then enter the figures into the online version of the sheet and get a beautiful report, pie charts and all.

If you still think that is too much time, check out It’s free for your clients. They can download transactions from online bank and credit card accounts, saving you both even more time and energy.

Once you’ve got their expenses recorded, ask your clients to highlight in different colours the following categories:

• the expenses that will go away;
• the expenses that will go down;
• the expenses that will go up; and
• the expenses that will stay the same.

Your clients may be shocked with the amount they will still need to spend on a monthly basis before the glorious golf vacations they’ve been dreaming of are even in budget. This exercise will give you a far more accurate figure for the baseline income required during retirement and allow you to plan for those basics, as well as the adventures your clients will want in retirement.

The bottom line is that you need to know your client’s bottom line when it comes to their expenses in their pre-retirement and retirement years. This might be a new topic for you and your clients, but it is an important one. Make sure your plan is aligned with their picture of retirement. They will be grateful for the reality cheque.

Stephanie Holmes-Winton is a Halifax based advisor who focuses on both sides of the balance sheet. Stephanie can be reached at or