Five Questions for a Top Retirement Advisor

A conversation with Robert Haley, JD, CFP, Advanced Wealth Management/Commonwealth Financial Network, Portland, Ore.

What retirement issue has hit you or your clients out of left field, and how did you resolve it?

The meltdown in 2008 of the financial markets and the economy: this is something that can be addressed but not really resolved. We addressed it by a constant stream of letters and e-mails (sometimes weekly or bi-weekly), phone calls and face-to-face appointments.

What prospecting methods have been most successful for you in attracting retirement-planning clients?

Making sure we take the best care possible of our existing clients, ahead of worrying about generating new clients, and reminding our existing clients and other advisors that if someone they care about would benefit from the kind of services we have provided to the client, then please refer those friends, clients or family members to us.

Do you face any frequently occurring retirement-planning mistakes with prospects?

There are three common mistakes: Now that they are retired, they believe they are "entitled" to a certain income from their investments, and it is up to us to generate that for them.

Prospects (and sometimes clients) do not have realistic views of how the financial markets work. Specifically, they believe they will obtain returns consistent with the 1980's and 1990's, and they do not in the slightest understand how the variability of returns affects how long their funds will last in retirement.

Finally, prospects almost all accept our industry's conventional wisdom that retirement cash-flow can "safely" be managed by investing with a total-return approach and withdrawing some percentage of the principal balance each year.

What challenges do you face when modeling or forecasting clients' retirement incomes and cash flows, and how do you resolve them?

The major challenge is dealing with the industry mantra that there is a safe withdrawal rate using a total return approach. I believe there is no safe withdrawal formula using a total return approach.

I "resolve" this problem by urging (not insisting) clients to invest for income, that is, interest and/or dividend income, and to withdraw for spending no more than their net total income after all management fees and expenses. Not all clients accept this, but most do.

The follow-up challenge to this approach is that clients then have a very difficult time accepting that the income available for withdrawal has gone down because of dividend decreases and interest-rate declines. I do remind clients that it is their money and they can withdraw anything they want, but they run a very big risk of running out of money before they die if they withdraw more than their accounts can safely generate.

What mix of products and solutions do you use most often and why?

We use a core of common stocks, most with dividends of 4 percent or higher but with a threshold of at least 3 percent, and bond funds (open and closed). The stocks give us inflation protection with the hopes of dividend increases over time and the potential of rising account values. The bond investments provide a different kind of cash-flow with no (or less) inflation protection and normally with less principal volatility.

We add to this mix some alternative investments, non-traded programs in real estate and leasing programs.

Finally, we do try to include some growth components, such as non-income ETFs, managed futures, and market-neutral funds.

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