Planning for retirement in 2017 is as great a challenge as it has ever been—but that’s probably good news for financial advisors.
At the 8th Annual Inside Retirement conference, sponsored by Financial Advisor and Private Wealth magazines in Dallas May 11-12, advisors were presented with new strategies to address issues like longevity and health-care planning.

Many discussions were spent questioning the efficacy of old rules of thumb like a balanced 60-40 allocation between equities and fixed income in retirement, or the 4.5% rule for annual retirement account withdrawals.

Dan Moisand, a partner at Moisand Fitzgerald Tamayo LLC, said during a discussion about the traditional 40-60 allocation that advisors’ time is better spent worrying about client behaviors than issues largely out of their control, like market returns and investment performance.

“One of the assumptions embedded in these discussions is that if returns are lower than average, our clients will fail to reach their goals, but that’s not necessarily true,” said Moisand. “If you have clients with a reasonable spending level, and control over their own spending, then it might not be the problem we’re making it out to be. The client has control over things outside their portfolio that are more impactful than what happens inside the portfolio.”

Bill Reichenstein, the Pat and Thomas R. Powers Chair in Investment Management at Baylor University, suggested that advisors could do more good for their clients by coordinating Social Security claiming and retirement account withdrawal strategies than through choosing an investment allocation.

Conventional wisdom holds that clients are best served in retirement by withdrawing money first from taxable accounts until they are exhausted, then from their tax-deferred accounts until those are exhausted, then from their tax-exempt Roths. Reichenstein disagrees with that.

“The assumptions of the conventional wisdom are just plain wrong,” he said. “Using tax-efficient strategies can add more years to the longevity of retirement accounts; you need to combine the withdrawal decisions with a Social Security claiming strategy.”
Successful advisors will be able to use such differentiated strategies to offer their clients services worth more than an investment portfolio.

In her keynote address, financial journalist Jane Bryant Quinn said that financial advisors will have to help clients manage risks associated with longevity, especially when it comes to health insurance and long-term care.

“The RIA who has a forward-leaning practice will deal with clients who want these solutions,” said Quinn. “The simple ‘How are my investments doing?’ conversation is so 1980s. The new conversation is ‘What do you want for your money?’”

Quinn recommended advisors expand their areas of expertise into Social Security, annuities, health insurance, life insurance and divorce planning, while sticking to simple, low-cost investment solutions.

Keynote speaker Nick Murray delivered a much-needed pep talk for planners who may feel under siege by industry disruptions.
“You’re selling the invisible,” said Murray. “Prospects aren’t going to buy how good you are at what you do, they’re going to buy how good you are at what you are.”

Advisors, in the human traditional sense, are the only ones out there who can provide investors with objective advice, holistic planning and behavioral guidance, said Murray, and there will always be a market for such services.