How to Coach Advisor Clients on the Empty Nest Transition

Advising clients who are entering the empty nest phase requires an approach that’s both strategic and tactful. Clients may experience a range of emotions surrounding this change, which could make it more difficult for them to focus on their financial plan. Successfully coaching clients through the empty nest transition begins with validating those emotions, and continues with helping them to approach their future with optimism.

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6 Ways to Help Clients in the Empty Nest Transition Period

While the empty nest phase is often associated with a specific age range, it does not follow a single, predictable path. Some clients may experience a gradual transition as children leave home one at a time, while others may face a sudden shift if multiple children move out at once. Cultural expectations, family dynamics, career demands and health considerations can all influence how clients experience this stage of life and how ready they are to engage in financial planning conversations.

Every client is different, and your approach in guiding them through the empty nest stage may need to be tailored to fit their unique needs and situation. Rather than assuming what the transition means for a client financially or emotionally, asking thoughtful, open-ended questions can help uncover priorities that may not yet be fully formed. This approach allows you to align strategies with a client’s evolving identity, values and long-term vision.

The following strategies are meant to serve as a blueprint for helping clients before, during and after the empty nest transition.

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1. Address the Emotional Impact First

Having children leave home can trigger a variety of emotions. Clients may initially feel excited for their children and exhilarated for themselves. But these emotions may be countered by sadness, fear or a sense of uncertainty about what comes next.

As their advisor, it’s important to objectively acknowledge and validate the feelings your clients may have about becoming empty nesters. This is where effective communication skills are vital. Actively listening to what your clients are expressing can provide you with clues about how to proceed when the conversation moves from emotions to finances.

Clients may need a reminder that the ending of one chapter is the beginning of a new one. Reframing the situation in a positive light can also help motivate them to take a renewed interest in their financial plan.

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2. Review Goals

Life changes, such as an empty nest transition, can directly influence a client’s goals and objectives. This is an excellent opportunity for you to sit down with clients and reassess whether the goals they set before becoming empty nesters still reflect what they want now that their children and moved out.

Some key areas to address include:

Housing: Clients may see their housing needs shrink or their preferences for housing change after becoming empty nesters. Some topics to discuss may include downsizing, moving to a retirement community, or a less common arrangement, such as retiring on a cruise ship or relocating to a foreign country.
Lifestyle: The future clients envisioned before the transition may look different now, so it makes sense to talk it through. Walk clients through what they hope their lives as empty nesters will look like, and what goals they may need to set to achieve those results.
Family finances: If you haven’t discussed it with clients already, consider talking to them about the level of financial support they may continue to provide to children who have left home. For example, will they be paying education expenses for one or more students? Is there an expectation that they’ll offer other financial support or transfer some of their wealth to their children in their lifetime? These types of goals need to be accounted for in their financial plan to ensure that they don’t conflict with or compromise their other goals.
Investments/savings: Clients may have set specific goals for yearly contributions to retirement accounts, investment accounts and other savings vehicles. Once the nest is empty, their ability to contribute to those accounts may be enhanced if they have fewer living expenses. There may be an opportunity to expand those goals if clients have more available cash flow to work with.

3. Audit Client Budgets

When a household shrinks, its budget may shrink accordingly. As you meet with empty nest clients, consider a thorough budget review to help them assess what their spending may look like moving forward.

Here are some tips that can help you make the most of this review:

Walk clients through each budget expense, line-by-line, to look for costs that may be cut or eliminated.
Review the client’s debt situation to determine if they now have more money available in their budget to pay down credit cards, loans and mortgages.
Encourage clients to track spending habits for discretionary expenses, like dining out, travel and hobbies, so they can better understand where their money goes.
Consider how client budgets may be restructured to allow more money to flow into savings and investments.

This may be a good opportunity to help clients create an estimated retirement budget if they haven’t yet done so. You can compare this budget to their savings goals and current progress to help them see whether they’re on track.

4. Update Portfolios, If Needed

Clients who are entering the empty nest transition period may need a portfolio review to ensure that their investments still reflect their goals and risk tolerance. A couple in their mid-50s, for example, may be beginning to think about reducing risk if they’re approaching retirement.

You may want to talk to clients about:

Retirement plan contributions: Increasing retirement plan contributions may be necessary for clients to reach their investment goals. If your empty-nester clients are 50 or older, they can take advantage of catch-up contributions to workplace plans and IRAs to boost their savings.
College savings: If your clients stashed money in 529 accounts for their kids, they may be preparing to draw those funds down to pay for college. Your clients may need guidance on how to ensure those distributions are tax-free, how to allocate remaining funds, and what to do with any leftover 529 plan money.
Consolidation: Empty nest clients may prefer simplicity when it comes to their asset location. If your clients have old 401(k) plans from previous employers, or multiple IRAs, you might want to talk to them about the pros and cons of streamlining their portfolio through a rollover or conversion.
Allocation and diversification: Empty nest status assumes clients are in their 40s, 50s or 60s, which means their asset allocation and diversification needs may look very different from those of someone in their 20s or 30s. A client portfolio review can help you both assess whether their current portfolio structure is designed to help them reach their goals, without exposing them to more risk than they’re comfortable with.

5. Optimize for Taxes

Tax planning is always an essential element of financial planning. However, it may take on new meaning for clients in the empty nest transition. Having children leave home may mean the loss of certain tax credits or deductions. Likewise, clients need or want to adjust their tax withholding at work.

There are other considerations, as well. For example, say a client expresses interest in paying off their home. That could mean the loss of another tax break in the form of a mortgage interest deduction. They could offset that by making charitable contributions or funneling more money into tax-advantaged retirement accounts.

Looking at a client’s complete tax picture can help you determine which tax optimization strategies to apply. This is also an opportunity to do some forward-thinking and planning to account for how a client’s tax situation may change as they get closer to retirement.

6. Talk to Clients About Estate Planning

Estate planning conversations may be uncomfortable for some clients, but they’re a necessary part of financial planning. You can reassure empty nest clients by highlighting the benefits of planning early, from both a financial perspective and a family perspective.

Possible topics for discussion may include:

Writing a will if the client hasn’t done so yet
Creating one or more trusts to preserve wealth
Developing a plan for philanthropic giving, which may be appropriate if you primarily work with high-net-worth clients
Establishing an advance health care directive
Drafting appropriate power of attorney documents
Long-term care needs, and the pros and cons of purchasing long-term care insurance
Disability and life insurance needs
Medicare and Medicaid planning, if clients anticipate needing Medicaid coverage to help pay for long-term care

Those in the empty nest transition period may find themselves juggling multiple balls: planning for their retirement, helping children make the move to adulthood and caring for their elderly parents. Being sandwiched by these different responsibilities could take a toll financially and emotionally, unless you’ve helped them develop an actionable plan for managing them.

Bottom Line

An empty nest may be jarring for clients, and they may lean more heavily on your advice and guidance to help them get through this period. Being understanding of your clients’ emotional response as well as their financial needs can help develop a plan to make the transition as smooth as possible.

Tips for Growing Your Advisory Business

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Earning professional credentials can help you target niche markets and grow your business. For example, if you’re interested in primarily working with empty nesters or pre-retirees, you may consider a Retirement Income Certified Professional (RICP) designation. This type of certification could prove useful when making the transition to a retirement planning career if you’ve previously offered a broader range of financial advisory services.