Why pre-authorized contributions are ideal for younger clients

'It's disciplined saving, so they just put it away'

Why pre-authorized contributions are ideal for younger clients

While some advisors may be wondering how to entice clients to invest what’s left of their pandemic savings or what they could still accumulate, one advisor has a ready-made solution.

“Most of my clients like pre-authorized contributions, so they don’t even think about it,” Elke Rubach, president and financial advisor for Rubach Wealth Holistic Family Advisors, told Wealth Professional. “It’s disciplined saving, and they just put it away. There was no change during COVID.”

She did work with clients who received special bonuses to ensure they had solidified their emergency funds and were investing the rest to meet their financial goals.

“We have an ongoing conversation,” said Rubach, noting those discussions go beyond her regular client meetings – which she usually holds monthly at first and biannually later – when she examines clients’ risk capacity as well as their saving and spending patterns and whether their financial goals have changed. “But, we have pretty much everyone on monthly contributions.”

Rubach noted this is particularly popular with the younger generation, which may still be developing the habit of saving.

“This is the best way to do it because it’s just pay yourself first,” she said. “Then, when you have lawyers, for examples, whose salary goes up, you can say, ‘okay, the fact that you’re making more money doesn’t mean you shouldn’t be spending more money. Yes, you can have a little reward, but don’t fall into the golden handcuff trap of trying to keep up with the Joneses because you’ll be living with a lot of stress.’”

Rubach, who was formally a lawyer, said her holistic practice doesn’t chase the returns or try to time the market. “We want to work with people who think this is a long-term relationship. So, if they’ve found some money, they actually call and say, ‘hey, I’ve been able to save a little bit more – or I’m getting a severance package – so what should we do with it? But, it’s not that they came out of the pandemic saying, ‘we made a lot of money’.”

Rubach noted that she had one client win about $250,000 in a lottery during the pandemic. They cleared some credit debt and invested the rest since that was better than paying off the mortgage.

“It’s a discipline,” said Rubach, “but it’s critical to have a plan.”