If one could identify a theme that runs through most discussions or media reports about baby boomers it would probably be somewhere along the lines of, “What comes next?”
As boomers begin moving toward retirement, advisors are searching for the best solutions for moving their clients beyond the accumulation phase. But there are many unknown variables that will come into play once the boomers actually do begin retiring.
Interest rates, inflation, the stock market, the housing market, health care—these will all impact their retirement plans to varying degrees. How advisors help their clients navigate these unknowns will go a long way toward determining the success of their practices.
So it was interesting to have the opportunity to sit in on the Life-Cycle Investing for Financial Planners program at the Boston University School of Management this week. The conference allowed advisors to come together and share ideas about building a better practice.
The topics looked at everything from financial planning to portfolio management to branding and implementing new business models. To be sure, the program wasn’t specifically tailored to servicing boomer clients, but it allowed some insight into how advisors are searching for answers to some of the most pressing retirement needs of clients. Zvi Bodie, the Norman and Adele Barron professor of management at Boston University led the program.
Truth be told, one of the most interesting discussions that took place on the first day of the program had less to do with the financial planning process and more to do with how advisors can brand their practice. In other words, how do you provide some evidence of your value that it becomes irrefutable? As one participant noted, performance can be so varied that it’s difficult to promise performance. So the key is to help clients frame what their expectations should be.
But back to the question of irrefutable evidence on your value: An analogy that was used was that of a chiropractor. For years, chiropractors worked against the forces of the medical industry which saw little value in what they did. You have a hurt back? Your doctor can handle it. Little respect was given to chiropractic. But as time has gone by, chiropractors have proven their worth. Doctors will now concede that perhaps a specialist—a chiropractor—should probably check out that back. So chiropractors essentially built their profession on something that other doctors could not do better. Advisors have to build similar value.
Here are some other takeaways from the program:
- One advisor said that a huge risk for people entering retirement is spending too much money in the first few years. They now have time they never had before and can blow their budget in the first few years.
- If an advisor were to become an expert on Social Security advice, it would have to be the sole focus of his or practice. The issue is so complicated and takes so much time, in other words, that it would be difficult to work on other aspects of your practice
- One advisor questioned why, over the past several years, we have developed this expectation for people to be wealthy during retirement without working. He noted that throughout history most people have died poor.
- Some times was given to assessing the generally negative view that people have of financial planners. In fact, one advisor, who is also a CPA, said that when she asked what she does for a living she always tells people that she is an accountant.
- Getting back to the comparisons with the medical industry. An advisor noted a huge difference: Doctors serve the general population; they don’t just serve the elite. Can advisors somehow do the same?