While working on my new book The Encore Advisor, I uncovered several new retirement trends that advisors should not only take note of, but also begin to develop strategies and resources for. It’s been said for years that baby boomers will leave their mark on retirement, like other phases of life, and those claims are holding true. Characteristics such as their group mentality, openness, desire to influence, and the personal challenges they face as a result of their approach to life, provide valuable opportunities for advisors willing to spot and adapt to change.
No, that’s not a typo. WEtirement symbolizes the idea that boomers like being around each other. They’re comfortable in groups, learning, growing and living life together. This simple reality is one of the more profound, yet least understood, trends I see among new and soon-to-be retirees. So much of money, investing and retirement planning is private, but that’s changing.
I’ve been studying this phenomenon for some time now in my Naked Retirement workshops, where the most common response to the question “What did you like most about the workshop?” is “hearing what other people are doing.” Along the same lines, when people are asked “What’s the one thing you wish you had more time for?” once again, peer interaction, or hearing more from the group ranks among the top responses.
I know many of my colleagues have grown tired of seminars, believing they’re a prospecting tool of the past. And they’re right. Boomers don’t want to be preached to. They can get that at church. Instead, they want someone to guide, encourage and empower them so they can make the most of their time, energy and money. They don’t want an advisor to figure out retirement for them, they want help figuring it out for themselves and to hear if it's in line with what their peers are thinking and doing. That’s why a workshop format, where interaction, guided questions, and insights from both advisors and group members, contributes to an experience they will remember.
Boomers are no longer afraid to discuss taboos traditionally associated with retirement. Topics such as sex, money, adult kids, aging parents and religion are all on the table and open for discussion. Go to the "retirement section" of most major media sites and you’ll find story after story with personal information and details on subjects once reserved for a therapist or priest. As a way of challenging people’s mindset about traditional retirement plans, I often ask my workshop attendees to stand up and tell everyone two things: Their age and how much money they have saved for retirement.
The look on many of their faces is invaluable, but believe it or not, I always get volunteers who are willing to share the normally off-limits information. Now, I always stop them just before they reveal any details and simply use the exercise to point out that they, along with their retirement plans, shouldn’t be defined by numbers and dollar signs alone, but they don’t know that when they are volunteering.
Without getting into much more detail, I can assure you this powerful new trend will spawn higher levels of interactive, group investing. Think of a local version of the show Mad Money with Jim Cramer where followers show up to get your take and input on what they have and want to do, along with that of their peers. It may sound far off right now, but imagine the efficiency that comes from working with a group instead of one-on-one with everyone.
Another trend is retirement entrepreneurship. We’re all familiar with the cliché version of this, where either the bored retiree stumbles into a business or an inspired retiree turns a passion or hobby into an online company. Yet, entrepreneurship in retirement is becoming much more than luck or happenstance. In fact, I believe it’s one of the most powerful prospecting trends to hit the financial industry since retirement income or college planning. First, entrepreneurship rates are highest among 50 somethings, and whether they left the factory floor, corner office, hospital or school, 20 or 30 years of doing nothing isn’t that appealing to them.
I’ve seen a number of basic services and Web sites to help boomers in this area, but they don’t even scratch the surface. Fortunately, most advisors are business owners and generally have several small business owners as clients. This makes them uniquely qualified to help out with not only traditional things such as funding and business structure, but also the role it can play in helping clients “retire to something.” They are looking for a business that can help them fill their time, replace their work identity and even generate income to reduce funding gaps or increase their desired lifestyle. Imagine the number of prospects that are five or ten years away from retirement who would like to start planning and saving now to start or fund a small business to keep them busy and engage during retirement.
Not only can owning or starting a local business provide purpose, legacy and community connections, it’s also an exceptional portfolio diversifier. No matter what’s happening with Wall Street or the Federal Reserve, local businesses tend to have a very low correlation to those factors and major asset classes, creating an opportunity that benefits both the client and knowledgeable advisor.
Of course, not everyone is suited for entrepreneurship, running a franchise or even just a home-based business, which is exactly where crowdfunding shows up. Whether you’re unfamiliar with the concept or you’ve helped fund a business idea through the likes of Kickstarter.com or similar Web sites, the JOBS Act of 2012 ushered in a whole new asset class that I believe could eventually make up 10 percent of a portfolio.
In short, crowdfunding allows individuals and companies to offer shares of unregistered securities to regular, everyday people. There are some proposed rules that are likely to be put in place to protect consumers, but even with them, the potential for fraud is huge. Therefore, investors who decide to go it alone and don’t, or are unable, to do the necessary due diligence may see some of their life savings vanish. On the positive side, skilled advisors will find themselves in front of more prospects and clients looking for professional guidance in this area.
One of my core beliefs is that traditional retirement planning is a lot like an iceberg, where 90 percent of what takes place in everyday life lies below the surface and out of mainstream conversations and planning. Earlier, I noted that this is changing as a result of boomers. Therefore, advisors need to be prepared to develop skills and resources to help clients deal with major, but perhaps hidden, concerns.
Yes, advisors still need to maintain core centers of influence, such as CPAs and attorneys and know how trusts work and the tax implications of various investments, but they also need a handle on the new, more personal aspects of retirement wellness. They need tools, resources and alliances with professionals who can help clients deal with the mental, social and physical aspects of retirement including how to:
• Prepare their marriage for retirement.
• Empathize with clients facing a life changing medical diagnosis.
• Stay mentally and physically active.
• Acquire new skills and knowledge.
• Help “launch” their adult children out of their households and retirement savings.
Without trying to turn you into a therapist or asking you to be everything to every client, I simply suggest as these trends continue to reshape traditional retirement, and as new and deeper conversations take place with clients, that advisors collect and build resources to help raise awareness of these issues.
I recently wrote an entertaining letter that parents could send to their kids letting them know they aren’t going to be receiving any more money. I based it on a well-known response to a letter sent home by a college student to mask her failing grades. Now, I don’t expect any client to actually use it, but it’s a simple way to lend some humor and perspective to a challenging topic. Whether a humorous letter like this ends up in a newsletter or brochure in your office, it’s a simple way to let clients know you’re familiar with the situation, that they aren’t alone, and that, over and above this funny stuff, you can provide professional contacts and resources to help ensure their needy kids don’t ruin their retirement.