A colleague of mine shared an interesting story about a friend of his who would be retiring soon. The friend wanted some advice about financial advisors. “He told me he has worked with a terrific guy for years and done very well investing,” my colleague explained. “But now he wants someone who specializes in retirement. I assured him his advisor could help with retirement needs, but he said he didn’t think so.”
According to my colleague, the client said: “For years, we have talked pretty much only about investing and the markets. Once in a while he will start a conversation about estate planning or Medicare, but he doesn’t really follow through. And he’s met my wife only once.”
Oops.
If you think this scenario is unlikely, it’s not according to the clients. In surveys, advisory clients indeed say the No. 1 thing they want to hear about from their advisors is retirement income. Two-thirds of them want to hear about issues of longevity planning and health. And many complain that their advisor has not included their spouse in any meaningful planning conversations.
When I talk to advisors (virtually these days) I perceive big disconnects in the retirement planning dialogue they’re having with clients. Some of these gaps have been common for years—and it happens because clients aren’t asking and advisors aren’t offering. Part of the problem is that there’s a lack of regular engagement between the parties and it’s likely that the clients are spreading their assets around, not connecting with a specific advisor. Remember that these clients will eventually consolidate and you want to be on the receiving end.
I’ve seen this movie before. For human fossils like me there lingers a clear memory of the struggle to retain clients that was frustrated by market volatility in the 1980s, particularly in 1987, and the defections taking place from brokerage firms to bank trust departments and investment managers. Since there were very few RIAs in place at the time, brokerage firm advisors were often characterized at the time as “stockbrokers.” That led to the rise of managed accounts. “Real” advisors, the competitors would say, don’t charge commissions and will tell you the performance of your accounts. Why won’t your stockbroker do that?
Fast-forward to 2021, when the baby boomers’ median age hits 65. Many very basic questions about their fears and aspirations have been left unanswered by too many advisors. As the queries about stock performance and investment processes stumped the stockbrokers of the 1980s, these new questions can stump advisors today. It might get clients thinking, and the thought process might end in pink slips for advisors.
Here are some of the questions they’ll be asking:
How much do I need?
They may not be sure about how much income they can draw from their investments, and they fear running out of money in retirement.
How will I pay for my healthcare?
They are not sure about how much they should pay, whether they should buy insurance (or where to get it), what they need to do if they are hospitalized or what is covered. They are afraid because they don’t know how or how much to pay for healthcare as they age.
How do I decide about Social Security and Medicare?
They are not sure about how they make the right choices for benefits, or whether they should work with an advisor or consultant to decide. They are afraid of making a mistake with their elections, and that there’s no going back if they do.
Can I stay in my home?
Clients aren’t sure about their financial ability to pay for their house, whether they can use any of the equity they’ve built, or what’s the best way to access that value. They are afraid they may have to move to a long-term-care facility and don’t want to.
How can I preserve my independence and not burden my family?
The clients aren’t sure how to do what they want without creating work for their children. They aren’t sure how to live where they want or how to leave something for the kids and grandkids. They fear they will need help at some point but don’t want to be a burden. They are also afraid of needing help and losing their ability to manage.
These questions might seem basic, but they aren’t, according to the clients. Just as we learned in the managed account journey, there is a good news/bad news story here. Keep in mind some practice management realities (and opportunities):
The clients in these surveys might not sound like yours, but they belong to somebody. This is a great moment in time for prospecting if you can use the questions here and be the one asking instead of the one receiving. Remember, the typical baby boomer retiree with money has four to six financial “relationships” and, again, they will consolidate.
Test yourself and your practice. If you think you’re in good shape, you should be able to send a note to each client during tax season, when everyone has to look at their finances, and say, “We’ve talked about these big questions of retirement planning, and if you have any concerns, please let us know when we can connect.”
The same message could be shared with any mailing list of prospective clients, posted on your website or included in an ad. “Your retirement questions answered. That’s what we do. Get our opinion.”
My final admonition is that the spoils are worth the effort. Managed accounts came from nowhere to encompass more than $7 trillion today. Don’t underestimate the potential of a trend that builds slowly and doesn’t feel obvious. The difference this time with the wave of retirees is that there is a lot more urgency to funding retirements that have already started. Start answering those questions—and asking them yourself.
Steve Gresham is CEO of the Execution Project LLC, providing tools and training to advisors and their companies to meet the needs of a retiring age wave. He is also a senior education advisor to the Alliance for Lifetime Income, and the former head of the private client group at Fidelity Investments. He is the author of The New Advisor for Life (Wiley). See more at theexecutionproject.com.