Boomers' wanderlust could provide a bonanza in fees for advisors.
Beverly and Wayne Carpenter of Houston, ages 65 and
68, respectively, have little in common with the roving Dean Moriarty
and Neal Cassady characters of Jack Kerouac's On the Road fame. But
like Kerouac's heroes, the couple, both retired, are acting out a
fantasy many of us have as they roam the country in an RV on their own
voyage of discovery-blessedly, in the broiling summer heat, with the
added touch of air conditioning.
It is the third year on the road for the Carpenters,
who chucked their old life in 2002 for a "5th Wheel" trailer-pickup
combo that keeps them moving from place to place. They've been
traveling in the dry, open western part of the U.S. They spent the
summer in South Dakota and this fall in the Davis Mountains of West
Texas.
South Dakota, Texas, Florida, Washington and Montana
have a common allure: no state income tax for permanent residents.
Across the country, scores of graying preretirees and retirees-in fact,
Americans of all ages-are doing the same. Sensing newfound opportunity,
some financial advisors and wealth managers are tapping into this $14
billion market, assisting with planning details and helping manage
clients' assets while they're away.
The Financial Planning Association estimates a whopping 30 million
Americans are RVing these days, a potential gold mine in fees for
advisors. There's even a new Idiot's guide and a Dummies book on RVing
on the market. Florida alone, by some estimates, has upwards of 300,000
registered recreational vehicles.
"All the factors indicate the RV market is going to
grow over the next decade," says Jim Lubinskas, a spokesman for the
Recreation Vehicle Industry Association (RVIA), a trade group. "Given
that many RVers are baby boomers, they have more money and time to
pursue this lifestyle. RVers are more affluent than the population at
large. It's a good target market for financial planners."
This nomadic community has special financial
planning needs that advisors can fill. Where do you get your mail? How
do you budget expenses-particularly with the high cost of gasoline?
What type of RV should be purchased? Do you keep, sell or rent your
home? What are the tax benefits of owning an RV as opposed to a home if
your home is your primary residence? What will be your home state, and
how will that impact your choice? How much insurance do you need?
We asked several certified financial planners with
RV clients to share their triumphs and headaches with this community:
Mary Lacey Gibson, of San Juan Bautista, Calif.; Joseph R. Birkofer,
Houston, whose clients include the Carpenters; Douglas G. Neal, also of
Houston; and Jim Ludwick, of Odenton, Md..
Goals And Planning
Their goals, as you'd expect, vary. Some seek a new
place to settle down, others a new lifestyle. Still others want the
ability to travel where and when they want, to visit loved ones, to
avoid the hassles of commercial travel. Some work part time on the road
to supplement their income, or volunteer their services where needed.
In common with many RVers, Gibson's client, a
60-year-old retired U.S. government employee, wants to see the country,
and has no notion how long she will be on the road. "It could be ten
months to ten years," Gibson says. Birkofer's clients, the Carpenters,
have a bit of altruism in mind. Birkofer says, "They spend a lot of
time as park volunteers, for which they get free or reduced rates in
exchange for checking on trails, reporting maintenance issues, selling
firewood, etc."
Neal's clients, a Houston couple, both 69, have the
same idea in mind. "They began four years ago," says Neal. "They're
traveling in a motor home, helping small congregations build or remodel
new churches. They set up for about three to four months in one
location, and when that project is over, move on to the next state or
city."
Good planning is essential, and advisors should help
RV clients lay the groundwork. Birkofer says people who choose this
lifestyle are innately good at planning, easing somewhat the advisor's
task. The Carpenters, he says, didn't have a big financial planning
problem. "We helped them solve the biggest planning issue for retirees,
which is drawing up and living within a budget. We handle their
retirement savings, which is a regular account and an IRA, and they
draw their Social Security checks."
Gibson says her client mapped everything out fully
two years in advance in order to understand the RV lifestyle. "She
rented trailers and RVs during this time. She attended conferences,
contacted a financial planner and, most importantly, did a great deal
of soul searching to determine what she most valued in life. She has
clear goals about what she wants to experience and where she wants to
eventually live. She planned, and planned well."
Ludwick's clients included a couple of federal government workers in
their late fifties getting ready to retire. They had considerable
experience on the road and were in organizations that had prepared them
for their choice. Another couple, in their early sixties, Ludwick says,
sold both their home and business for $1.5 million and bought an RV for
$190,000. "The business couple was just getting started, and I
networked them with my other couple," says Neal, adding that the RV
dealership had a practice park, where they took "lessons" for a week's
time.
Working with both couples reminded him of John
Steinbeck's travels with his French poodle Charley. " I could see the
wanderlust in their eyes," relates Ludwick.
Financial Planning
Advisors should be aware of special financial planning issues involved with these modern day nomads.
For Neal, it was a matter of allocating his clients'
assets to produce as much income as possible and keep it safe at the
same time. He recommended a cash management brokerage account with
check writing and debit card privileges so his clients could readily
access their earnings, pay bills on time, and be able to see their cash
balances on a regular basis. This eliminated their fear of being
overdrawn.
The couple kept their house in Houston for a year
and had their grown son stop by regularly and check on it, but sold it
when it became too much trouble for the son to look after. They added
the proceeds to their investment accounts, and it enabled them to cut
expenses by not having to pay taxes and property upkeep. Bills were
sent to their son, who in turn forwarded them in a package to their
parents at their current location.
Neal helped his clients secure a Medicare supplement
and a long-term-care policy from a national carrier that could be used
anywhere. They settled on a joint LTC policy to keep costs down.
Gibson's approach with her client was hands-on. "She
owned her home and came to see me initially because she wanted to know
if she should rent or sell her home. Her home was in a fast-growing
area of California." Though she could have held onto the home and
possibly have its value appreciate, she decided to move on and cut her
ties. She sold the home and put aside $300,000 in laddered CDs for a
possible home purchase in the future, and invested the balance in a
diversified portfolio. "Between her pension and qualified and
nonqualified accounts, she had ample funds to allow her to live on the
road for as long as she wants," says Gibson. After some years she will
have to replace the RV, but the cost of this has also been factored
into her planning.
Other challenges can be vexatious, but need not be.
Wireless technology and the Internet have made communications seamless
in most parts of the country, and several mail-forwarding businesses,
including Mail Etc., cater to the RV/trailer set. It turns out that
mail is not a big problem with the RVers.
High fuel and insurance costs were factors in
budgets. The Carpenters, for example, are avoiding big urban areas due
to high gasoline costs and staying closer to home in Texas, according
to Birkofer.
Your RV clients are best advised to purchase health
insurance from a national carrier "so it can travel with you," says
Gibson, whose client settled on Blue Cross-Blue Shield. In the case of
Ludwick's clients, the government couple was well covered since they
were also military retirees with excellent cross-coverage by the time
they retired, the advisor reports. His business couple, on the other
hand, was relying on an individual policy costing close to $900 a
month. "The husband was within three years of Medicare eligibility, but
the wife was five years away. This was a major budget concern for them."
With these clients, there are issues you may or may
not encounter with regular clients. Gibson enjoys the special
challenges, and works with her RV clients on a project basis. Neal
found his level of servicing requires a client he can work with and
meet on a regular basis, whereas Birkofer is comfortable with them
traveling all the time "because we're communicating frequently by phone
and e-mail and no one else is chasing them."
Says Birkofer: "Most clients hire you because they want to have a
trusted advisor and because they don't have the time, talent or
temperament to manage their portfolios. But retirees who have adopted
the RV lifestyle don't want their investments to have the same nomadic
style they are enjoying. That can make for a great financial advisor
relationship."
Bruce W. Fraser, a New York-based freelance financial writer, was a commissioning editor of Sixty Things To Do When You Turn Sixty (Ronnie Sellers Productions) He can be reached at [email protected]. Visit him at www.bwfraser.com/home.