Retiring investors are not just worried about money. They are also nervous about entering that next phase of their lives, according to research from Global Atlantic Financial Group.
“In all the research and the conversations that we had, people said, ‘I have never felt so fragile, not only with my money but with my emotions,’” said Jeannie Underwood-Kotner, senior vice president and head of Global Atlantic-Consulting, a practice management division of Global Atlantic Financial Group.
Underwood-Kotner said her firm has created a “conversation blueprint” for financial advisors to have more meaningful and productive conversations with their clients as they enter the “Fragile Decade”— the five years before and five years after retirement.
Underwood-Kotner spoke today during the Next Chapter Rockin' Retirement virtual conference sponsored by Financial Advisor, the Money Management Institute and the Execution Project. She explained that the blueprint was built in part on research from the Financial Transitionist Institute, founded by Susan Bradley, known for her work with the Sudden Money Institute. Bradley’s team, she noted, has been working with financial professionals for more than 20 years on improving communication and empathy skills and working with clients through major transitions.
Bradley’s team, Underwood-Kotner said, has found that with any transitions, there are four stages: the anticipation stage, the ending stage, the stage of passage and the new normal.
But the retirement blueprint, she said, was mainly built around the anticipation stage, which is the moment you know some aspect of your life is going to change. This stage also corresponds to the first five years of the fragile decade, she said. In the next five years, after the end of work and during the passage stage, you start to tiptoe your way into your new life, and then to the new normal.
Those years are not only fragile for investors, but for their financial advisors, too, Underwood-Kotner said: “When people are saving for retirement, especially in their working years, they are working with between three and five financial professionals on average.” She added that people moving closer to retirement start consolidating work with one financial professional. “And so, with that stat in mind, we built this conversation blueprint to put you all in the best position to be that one advisor."
Atlantic Global has a five-year checklist for advisors to make sure they connect with clients at critical points in their relationships. “So, every year, you can start the year and say, ‘OK, this year these are the things we are going to cover and make sure we have covered so the day you step into retirement you rise and thrive.” Clients appreciate these checklists, she added.
The five-year checklist for advisors and clients looks like this:
Year 1
Underwood-Kotner reminded the audience that people are living longer. Their first year in retirement is your first with them in a journey that will possibly last 30 or more years. The No. 1 item is:
• Start the income plan conversation. Here, she said, it’s important to use the words “income plan,” not “retirement plan.” “When we talk about retirement plan, to them it’s not the same. They need to hear ‘income plan.’” Clients like to be reassured that their retirement income will not skip a beat even though the actual paychecks have stopped.
• Review their retirement budget by looking at the average American’s budget. We spend money differently and our bills are allocated differently in retirement, she said. “So, start showing [the client] that information so that they can start planning that budget and get an idea of what that budget looks like in retirement.”
• Start a retirement budget.
• Start an annual spending audit and a spring-cleaning checklist. “Everything is so digital these days, and I think people really and truly lose sight of their spending because of this digital age. So it’s really important for people now to start getting a grip on how they are spending their money.”