Start Counting … And Balancing
These client concerns are daunting in part because they involve things that are hard to quantify. So start there. Talk with the clients and begin calculating the costs.
Those of us involved in Next Chapter see a growing appreciation of the retirement balance sheet. The historic bull market in stocks and bonds has swelled assets, providing some level of comfort to retirees, but it has in no way kept costs from increasing in other critical areas. Residential real estate is now the nation’s biggest asset class. Your clients’ family home may fetch a higher price. But good luck to them in finding a new one—perhaps at any price. Meanwhile, healthcare costs and insurance rates are rising along with the cost of your favorite steak. So you must help clients begin lining up expenses against the assets that could fund them. You may also give them some confidence by helping them see that they can make a lot of potential trade-offs. It’s too complicated to guess about outliving savings, so you can get them used to balancing assets against liabilities and watch how opportunities for compromise begin to emerge.
The Liquidity Crunch: A Retirement Surprise
“There’s a growing need for clients to have a liquidity plan in place,” says Whit Magruder, co-head of Goldman Sachs Private Bank Select, or GS Select, which offers securities-based lines of credit to the intermediary market. Magruder says, “Advisors who can provide clients opportunistic access to liquidity that allows them to act quickly in a range of common scenarios—ranging from lifestyle purchases, expected (or unexpected) life events or business investments—will be able to differentiate their practices and ultimately deliver that peace of mind to their clients.”
This is a wake-up call for both advisors and their clients. Without the support of regular income, new retirees in particular can be forced to liquidate assets to cover big bills. The timing might not be right. And what about those taxes?
It all comes back to the No. 1 concern—health. The balance sheet view is solid analysis, but don’t forget the “why” of what we do: peace of mind. And nothing disrupts peace of mind more than health.
Listen to Frank McAleer: He says that advisors should provide vital financial planning services related to matching assets and income to future expenses and sources of guaranteed income. But in addition, he says, “advisors are helping their clients navigate the complicated and inevitable issues to be faced around family caregiving, critical medical diagnoses, Medicare coverage, scam/theft protection and organized legacy planning.
“The results of this approach are twofold. Our clients are receiving the empathetic planning they so desire from their advisor while our advisors are realizing higher levels of AUM via consolidation as they become the center point advisor to their clients’ families.”
Drop the microphone.
Steve Gresham is CEO of the Execution Project, which is focused on reimagining “retirement.” He’s also the managing partner of Next Chapter, an initiative whose partners include Financial Advisor magazine and the Money Management Institute. And he is a senior educational advisor to the Alliance for Lifetime Income. See more at www.theexecutionproject.com.