Alienation, noun — the state or experience of being isolated from a group or an activity to which one should belong or in which one should be involved.
I have a good friend (I'll call her Barb). Barb hates her financial advisor. I use the word “hate” here carefully. It is a direct quote. Professionally, the advisor has arguably performed well. The investments he manages for Phil and Barb have grown in value. Personally, however, Mark has sown the seeds of his own destruction. He has alienated Barb to an extent that is irreparable.
Barb is married to Phil. In 2011, Phil chose Mark to handle his and Barb's investments. Barb regards Mark as a chauvinist. He pays little attention to her, preferring to direct his gaze, his comments and his question to Phil. When he does on rare occasions address comments or questions to Barb, it is generally in a manner that Barb regards as condescending. Said Barb, “Mark never asks me about my kids. He doesn’t know that Lori was accepted to Northwestern. Or that Patrick is interning at Amazon. Or that Suzanne recently became engaged. What’s important to me isn’t important to him.”
Although Barb came to this marriage—a second marriage for both her and Phil—with more financial assets than Phil, it is a fact that has earned Barb no recognition from Mark. “He doesn't even get the fact that the majority of the money came from me,” Barb told me back in January of this year. “I don't make a big deal of that. I just let Phil take the lead. He's into his stocks, and he and Mark spend their time talking about this or that company's stock, and how some investment has or hasn't performed. Its uninteresting to me, to be honest.”
“What about his competency as an advisor?” I asked.
“For a long time, the money grew and grew. And I think Phil began to consider Mark to be some kind of investment genius. I questioned that. Because every time I'd hear on the news that stocks were going up—and that seemed like all the time—I'd think to myself, Is it Mark? Or is it that everything is going up?”
“When we started to have losses, I began to get nervous,” continued Barb. “Losing hundreds of thousands of dollars bothered me a lot. When I told Phil I was concerned, he said, “Barb, everything is going down right now. Mark thinks we should just stand pat, and the values will go back up.”
“I told Phil that I think we should try to preserve what we've accumulated rather than leave the money in investments that may not go back up. But he prefers to listen to Mark. It's frustrating because I don't think Mark ever thinks about what I need. Phil is 73. That's nine years older than me, and he has health issues. And that makes me think that I could be alone for many years. My mom lived to 89. Our savings is what I will live on, so my priority is to protect it, not risk it.”
I could see the expression of genuine concern on Barb's face.
“Look, I said, “I want you to remember two principles that are important for retirees to understand.”
“First principle: No retiree stops needing income.”
“And the second principle: In retirement, it's your income, not your wealth, that creates your standard of living.”
“Barb, if you remember these principles,” I said, "you will have a better chance of preserving your retirement security, because your investment decisions will always be tested against the context of creating and safeguarding your income.”
“That makes sense,” said Barb.
I told Barb that I would send her an e-copy of my book, Constrained Investor. And also, that I wanted her to watch a short video about these Two Principles.
I suggested to Barb that she and Phil speak to Mark about allocating some of their savings to the purchase of an annuity that will provide Barb guaranteed income for life. I explained to Barb that a combination of market investments and secure lifetime income is the best strategy for most retirees.
At a social gathering last month, Barb and I spoke again. She quickly brought up the subject of money. This time her emotions were highly charged. “Last week, we had a meeting with Mark. As you suggested, I had asked Phil to arrange the meeting. I explained that we should have an annuity that will pay me income for my lifetime. Mark dismissed it. Immediately.”
Mark: “You don't want an annuity.”
Barb: “But I do.”
Mark: “You really don't. They are expensive. You have to pay high fees. No, no. Keep your money invested. That is always the best strategy compared to an annuity.”
Barb: “But your way doesn't guarantee me that my income will continue!”
Mark: “No, but look. We did your plan. (Mark searches for the page he wants to bring to Barb's attention). Look, right here, a 90% probability that your income will continue for 30 years.”
Barb: “But, Mark, it's not guaranteed. And our investments would have to keep growing. Don't you understand, I want something that is certain. I want security. Less risk, more security.”
Mark: “You think you want security, but what you really want is a lifestyle. You need money in stocks to do that.”
Barb: “I am not saying to take all of the money out of stocks! I'm only saying that some of it should be put into an annuity. Social Security won't give me enough.”
(Mark looks to Phil in a way that silently pleads for Phil to take control.)
“Barb,” says Phil, “Mark is probably right. He's the professional financial expert, not you and me. I think we should take his advice.”
“Neither of you are hearing me!” Barb asserted. “I have a voice here. The majority of this money came from me! I'm telling you that I want to reduce the risk, and I want income from an annuity because it is guaranteed for as long as I live. My mother lived until 89. I'm probably going to be alone for a long time. Social Security won't give me enough income to live on. I need more. Why is this so hard to understand?”
(An obviously annoyed Mark suggests that they meet two weeks hence. The meeting ends, uncomfortably.)
As I listened to Barb describe the meeting with Mark, I thought about the regrettably large segment of financial advisors who have become wedded to a post-retirement investment strategy that is misaligned with the objectives and investing preferences that women say are most important. And I thought about those advisors who adhere to outdated conceptions about annuities, intentionally or unintentionally overlooking the fact that their criticisms are no longer valid.
Most significantly, Mark's arrogance, his hubris, his presumption that he knew better than Barb did about what she wanted has rightfully disqualified Mark from being able to manage Barb's money after Phil passes. Or maybe the end comes sooner. Already, Barb is asking her girlfriends about the advisors they are working with.
"I'll keep looking until I find one who will listen,” Barb told me. "I hope my husband lives a long time. But, when he dies, I will enjoy firing that ass%#@, Mark. I hate the guy.”
"Honestly,” she continued, "I really don't think I can tolerate him any longer. I'm going to speak with Phil and tell him that it's time for Mark to go."
I thought to myself, "Barb is about to exert her power. The consequence will be a man suffering a significant financial loss. And it will come as a complete surprise when it happens."
In honor of Women’s Month, I am offering readers a free eBook version of my book Constrained Investor: How to Avoid a Devastated Retirement. Use the link in the text above to download the eBook.
Wealth2k Founder David Macchia is an entrepreneur, author, IP inventor and public speaker whose work involves improving the processes used in retirement income planning. Macchia is the developer of the widely used The Income for Life Model, and the recently introduced Women And Income. He is the author of two books, Constrained Investor, and Lucky Retiree: How to Create and Keep Your Retirement Income with The Income for Life Model.