A new phase presents new opportunities for financial professionals
There are 10,000 baby boomers turning 65 every day — that adds up to between 3 million and 4 million potential new retirees every year. It’s a trend that will likely continue for the rest of the decade, according to seniorliving.org.1 For financial professionals, this rising tide of retirees represents a lifestyle shift that’s accompanied by a wave of uncertainty—but also opportunity—if they (and you) are prepared to meet the moment.
Jeannie Underwood-Kotner, senior vice president of Global Atlantic Consulting, has created what she describes as a “conversation blueprint” for financial professionals called “The Fragile Decade,” focused on helping financial professionals guide their clients through the five years just before, and five years just after, their formal retirement.
“In all the research the word ‘fragile’ kept coming up,” she says, noting that she’s heard people report that “’I’ve never felt more fragile financially. I’ve been looking forward to this thing called retirement, but now that I can see it, I’m thinking, did I do all the right things?’” She says that they also report feeling fragile emotionally, noting that “’I’ve had my entire life structured in a certain way. What will my new structure, my new pattern look like?’ And it’s causing many people to feel very apprehensive about this major life transition.”
It’s 9 a.m. on a Tuesday. You’re retired. What are you doing?
While it may be an apprehensive time for the new retirees, Underwood-Kotner says it's also fragile for the financial professionals who work with them. That’s because research shows that in the years when saving for retirement is paramount, investors typically work with three to five financial professionals. But as retirement draws closer, these soon-to-be-retirees typically consolidate to just one financial professional. This happens, says Underwood-Kotner, because this is generally a time when people are “looking to organize their financial life. They’re looking for a one-stop shop for their money matters.”
Global Atlantic’s “The Fragile Decade” provides a year-by-year checklist for financial professionals to help them make sure they are doing right by their clients, while also putting themselves, as Underwood-Kotner puts it, “in the best position to be that one financial professional.” By year two, she says, it’s imperative to start having conversations with clients to help them visualize life in retirement. Ask them this question, she suggests: “You’re retired, it’s 9 a.m on a Tuesday. What are you doing?” It’s essential, she notes, that as these investors settle into their retirement lives, their financial professionals continue to stay in touch to help them adjust to this new stage. It’s an approach she calls “experience-centric”—taking the conversation “beyond money.” As she describes it, financial professionals who help clients “find their retirement” ultimately will be in the best position to fund their retirement.
According to annuity.org, more than half of workers—55%—plan to work in retirement, citing reasons that range from inadequate retirement savings to wanting to remain vital.2 Underwood-Kotner says that up to two years before a client’s planned retirement date the discussion may include tax strategies, possibly involving a tax professional, and clients may begin to “practice retirement” by living within their expected budget.
But perhaps most critical to her conversation blueprint for financial professionals are two words: income plan. Every investor in the “fragile decade” needs to hear those words early and often, Underwood-Kotner says. She asserts that financial professionals who create an income plan for their clients in retirement will ultimately collect more of those clients’ assets.
In a LIMRA survey of financial professionals about 90% said they strongly agree or somewhat agree that offering comprehensive retirement income planning was key to growing their business, and that such planning leads clients to consolidate their assets with them or their firm.3
A new job for financial professionals
The ongoing surge in retirees has spurred a transformation in the investment world much like the move made decades ago by stockbrokers who, while predominantly “drawn to the action,” became managed account consultants and wealth managers, notes Steve Gresham, CEO of The Execution Project, a firm that consults with leading companies in the retirement and wealth management industry. Gresham, who is also Senior Education Advisor to the Alliance for Lifetime Income, says advising new retirees and managing their portfolios poses some unique challenges.
“I don't think that the vast majority of people are prepared either financially or emotionally for the stage that we call retirement,” says Gresham. “There is activity and recreation and travel and education— and a lot of boredom. They miss the work they used to do. So the challenge for the financial industry is to determine whether or not they may actually make the transition with the clients. The empathy required to support a family in their retirement is just a different business.”
In fact, Gresham contends, educating retirees is an entirely “new job,” adding that those who are the most successful at it have treated it as such.
“When you take responsibility for that next chapter, that is a very, very different role than the industry has had historically, when we have been sort of helping them, guiding them and then telling them to be smart about investing for the long term,” he says. “Well, it's not long term anymore. Now it's happening. The bills are arriving and there's a lot of anxiety, which has been heightened by the pandemic and global instability.”
The demands of assisting retirees are simply more urgent, Gresham explains, and present a level of complexity that the financial professional probably wasn’t working with before, “in part because it probably wasn’t that relevant to the clients either.” Gresham says the financial professional suddenly needs to become far more creative and precise, and “aware of every possible leverage point you may achieve for the client.” Among the possibilities he cites are these: spending on a life insurance premium rather than just leaving the policy’s cash equivalent to an heir; buying an annuity as protection against living longer; securing managed assets and improving liquidity with a loan against those assets; and purchasing long-term care insurance, as well as, perhaps, shares in a continuous care facility.
More complicated than expected
For all but the very wealthiest investors, says Gresham, “the financial solutions [in retirement] are going to be more complicated than they had ever expected.” And he believes most financial professionals are “still thinking like people who help people accumulate and save. They are not thinking so much about helping people survive their retirement in dignity and independence. It's just that that becomes a center of gravity.”
To accomplish that shift in focus, Gresham suggests that financial professionals may take full advantage of a team approach, either within or outside of their firms. “There are great options out there about affiliating with complementary professionals,” he notes, “but [retirement] is a specialty area. You may not be able to maintain expertise in too many things.”
Gresham compares it to medicine. “It’s not any different than the physician who says, ‘I really need to affiliate with people who know different stuff than I do’ because they get the benefits of somebody else doing things they’re not going to do.” Furthermore, he adds, “it makes so much more sense to align yourself with other people who have complementary skills so you may hold onto your retired clients and still meet all of their needs.”
The “fragile decade” blueprint devised by Underwood-Kotner includes several suggestions for keeping clients both satisfied and in the fold once they start experiencing life as retirees. Among these: hosting semiannual parties for clients who have retired in a given year and informing them about volunteer opportunities of which they may be unaware. Ultimately, responding to the continuing wave of nearly and newly retired investors and seizing the opportunity that presents requires a balancing act, she says: “As the world has evolved, so has the consumer, the investor evolved. They expect a lot more, and the financial professionals who provide more guidance outside of money and align with clients emotionally are the ones who are collecting more assets.”