Most financial planners have a difficult time helping clients reduce their spending habits and start saving. Rather than reducing spending, many will simply lament that everything would be fine if they only had an additional $10,000 a year. This is not unlike our current political debate regarding our national deficit spending.

So it was with double interest that I read a Journal of Financial Planning article by James Grubman, Ph.D.; Kathleen Bollerud, Ed.D.; and Cheryl R. Holland, CFP® entitled Motivating and Helping the Overspending Client in which they wrote that most advisors:

might believe the following inaccurate assumptions about behavior change:

• If the facts indicate someone needs to change, then the person should be ready and willing to change
• All clients who understand they have a problem are prepared to make a change for the better
• Being unable or unwilling to change represents resistance to you and the facts
• Once a change has been made it should be easily sustained

Most advisers take the rational, commonsense approach of showing financial projections designed to heighten clients’ awareness and lead to fiscal restraint. Though a factual approach can be persuasive, the key factor is not rationality but receptivity. When clients are simply not ready to hear about what will happen if they keep on overspending, your best warnings will fall on deaf ears.

The parallels between an overspending client and an overspending nation are especially strong.

A strategy with clients in denial is to inquire, “It seems your spending is something that you really don’t want to change at this point. Is that the case?” With confirmation, you can comment, “It feels irresponsible for me not to point out your potential financial jeopardy. At the same time, I don’t want to ruin our relationship trying to convince you. How do you think I can be helpful to you?” The client’s response to this conversation will give you good information about whether the advisory engagement is even viable.

As an advisor we can refuse to work with clients in denial who are not ready to change. For those who are ready to change, we’ve found the community and information provided by Dave Ramsey’s Financial Peace University to be invaluable. It is more difficult, but not impossible, for businesses to refuse to work within countries unwilling to provide economic freedom and lower tax burdens.

Ultimately, you need to evaluate whether to commit time and energy to working with a person entrenched in denial or to devote your resources with clients more responsive to change. If you accurately assess the potential client as not ready to change, it’s best to refuse the advisory engagement. Repeated, ineffective efforts to change a denier can be a drain not only on time and resources but also to your emotional level, leading to burnout.

As an advisor we can avoid the frustration of working with those who refuse to moderate their spending. As an investor we can also avoid the frustration of investing in countries with low economic freedom and high debt and deficit.

Read the full article if you want to be your own therapist, or else go to napfa.org to find a fee-only fiduciary in your area.

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Link posted with permission by the Financial Planning Association, Journal of Financial Planning, “Motivating and Helping the Overspending Client: A Stages-of-Change Model” by James Grubman, Ph.D.; Kathleen Bollerud, Ed.D.; and Cheryl R. Holland, CFP®. For more information on the Financial Planning Association, please visit www.fpanet.org or call 1-800-322-4237.