How do you tell a client she can’t retire yet? How do you tell another he can’t sustain his current lifestyle? Delivering bad news comes with the territory for financial advisors.

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It’s essential to deliver the bad news with hope and actions that can be taken to fix the problem, he added, recalling a recent situation. Colarossi was beginning the retirement income distribution process for a client with $5.5 million in assets, of which only $2 million were investible.

She was living a very high lifestyle, withdrawing 10 percent per year, and I had to say to her, ‘It won’t work,’ he said. She was stunned, and asked, ‘What do you mean?’

The first thing Colarossi did was reassure his client that she’d been very successful and had accumulated a wonderful portfolio but did not have the income she needed.

She hadn’t been looking at the withdrawal percentage, just the dollar amount, he said. People do simple arithmetic, [and] she didn’t understand that the equilibrium rate—what her investible assets needed to earn—was 14 percent.

Colarossi explained, She was taken aback, questioning if I was right. But I quantified everything, and eventually she said, ‘I think you have a point.’

His immediate prescription? In the short term, live within your means, scale back, and try to sell assets such as real estate in order to get more income-producing assets.

It’s very important to look at the big picture—usually it’s not all bad. You can’t be dramatic. In reality, people usually know what they did, said Helen Simon, certified financial planner, retirement management analyst and CEO of Personal Business Management Services.

• Spouse vs. spouse: Often, one spouse doesn’t know what the other is doing. It’s usually the husband handling the investments, but he doesn’t want to admit what he’s doing or if he made a big mistake. So it’s my job to bring it to the forefront.
• Keeping up with the Joneses: The husband wants to give his wife everything she wants—but can’t afford it. He doesn’t want to admit that he doesn’t make as much as people think.
• Waiting too long to save: There are a lot of people in their 50s who decide, all of a sudden, [that they] need a financial advisor. But 15 years is not a long time—especially if you’re not saving an astronomical amount of money.
• Severe market corrections: You’ve got to show the client the big picture of the portfolio over time. Clients will be receptive if you prepare them the right way. You have to be somewhat [parental]: Explain to them that if they are diversified, they’ll have gains that make up for those losses.