Longer life spans will have profound implications for advisors and the financial services industry, according to two industry thought leaders.
Life expectancies are poised to accelerate in the next two decades, driven by advances in medical technology, said Ric Edelman, chief executive at Edelman Financial Services.
Some scientists are even beginning to talk about life expectancies of 150 years or more, he said.
“Even if the advancement is not that radical … what happens when you extend that to 100 or 105?” Edelman asked.
A couple at age 65 has a 25-year life expectancy between them, said Russ Hill, chief executive at Halbert Hargrove Global Advisors. “And that’s growing, especially for the [wealthier] demographic served by advisors.”
Hill and Edelman spoke on Friday in Dallas at Financial Advisor and Private Wealth magazines’ 7th annual Inside Retirement conference.
One implication is that the notion of work and retirement will change. Clients may work longer and in different ways.
“We’ll have 75-year olds who have played golf, traveled, then look around and say, ‘I’m bored, I’m feeling pretty good, what else can I do? And by the way, I could use some extra money,’” Edelman said.
These clients may not need to earn a lot of money, which will open up opportunities to work at something they enjoy, he said.
This second-career trend is already happening. Hill noted that while the overall labor-force participation rate has been falling, for the top quartile of income earners the rate has been rising since 1998.
Both Hill and Edelman are introducing late-stage career counseling as part of their firms’ services.
Second or third careers are an option many clients may have no choice but to consider. By a show of hands, a majority of advisors at the conference thought their clients are retiring too soon.
The workforce transformation driven by technology “will be extremely disruptive” to career planning, Edelman said.
For example, assuming self-driving cars eliminate accidents and traffic violations, the automobile insurance industry could disappear, chiropractors will lose business, and municipalities could lose an important source of revenue which could impact the stability of municipal bonds.
“It’s hard to see where the dominoes stop falling,” Edelman said. “You need to identify which clients are in occupations at risk” and what they need to do to protect their income.
Estate planning will need to encompass not just two or three generations, but four and even five, Edelman added.
With both clients and their parents living longer, advisory firms should include dementia as “part of the normal planning process,” Hill said. “Twice in the last month, we’ve been asked to confront a declining spouse of a client, but we’re not trained for that.” Advisors need to find and vet outside resources and assisted living facilities, he said.