The upside-down approach hits home with a variety of people because most have experienced one or more of those real life aspects of retirement. Whether you get a laugh out of them, or a “hmmmm,” it provides a fresh perspective, which is exactly what many people are looking for. Additionally, it touches upon my second technique to turn retirement planning upside down: meeting people where they are at.
Like other financial planners, I often find myself talking way above the heads of clients and prospects. I do love the finer details of investing and portfolio management, but many people don’t care about modern portfolio theory or security selection as much as I do. So I’ve found it extremely valuable to infuse retirement planning concept into their current situations as a means of broaching issues that most people would prefer to postpone or avoid altogether.
In another piece entitled, "What If Portfolios Could Talk," I made light of the way many people manage their portfolios … and the need to get professional help with them. Instead of hitting people over the head with the need for asset allocation or diversification (concepts that have been discussed to death), I posed a more personal question: “What would your investment holdings say about life in your portfolio, the conditions and care you provide for them? What secrets would they reveal about you? If portfolios could talk, which of the following categories would your investments put you in?”
Military Family
If you’ve ever known or talked with a “military brat,” you know life for them can be one of frequent moves, costly transitions and feeling as if they never fit in. A similar profile can be applied to investors who constantly changes their portfolio holdings and never settle into a disciplined strategy. Whether they’re chasing performance, trying to avoid a market meltdown or jumping on the latest-and-greatest bandwagon, their individual holdings never have time to come together, establish an identity or role within the portfolio. Consequently, they often suffer because constant trading costs and fees reduce overall return. While many investors do it in an effort to secure their own financial freedom, it may be time to change your portfolios trajectory and acknowledge that a stable, disciplined approach offers a less stressful path to the same goal.
Fashion Emergency
Leg warmers, pagers and Member’s Only jackets aren’t cool anymore, and friends are laughing at those who still have them. Likewise, the investment options inside your 401(k) or 403(b) may have changed when your company switched providers, or if you switched employers, but that risk tolerance questionnaire you took five or 10 years ago is now completely out of date. You’re not only older and have more money inside the account, but your personal situation has probably changed. No doubt you once looked cool in the headband, and felt like a VIP when your pager went off, but now you’re approaching retirement and it may be time to shift some equity assets to fixed income and adjust your growth holding to include some dividend-paying value options. Yes, some fashions do eventually come back into style, but that’s not the case with investments. You may have liked the old stuff, and find it’s still easier to wear those comfy clothes, but admit it’s time for a makeover, starting with re-alignment of your asset allocation based on your age, risk tolerance, and retirement horizon.
Once again, by emphasizing familiar situations, such as those typically found in a military family or lagging behind the fashion curve, advisors can help clients and prospects uncover retirement planning concerns they may have and need to address.
Another way I like to turn retirement planning upside down, and even inside out, is to address taboo subjects. This notion is supported with a number of previous FA columns that include topics such as religion, sex, suicide, addiction, divorce and other “dark side of retirement” issues. These occurrences are likely to increase as more baby boomers reach retirement.
In fact, in response to the recent passing of actor/comedian Robin Williams, I wrote a new guide titled, The Dark Side of Retirement: Mental Health Challenges Facing Baby Boomers. It’s not fun or flip in any way; it’s real, genuine and a topic retirees need to be aware of … and one that has to make it into more retirement planning conversations. (You can download a free copy of it here).