After seven years of watching clients approaching retirement waltz into his office with no previous history of working with an advisor, Frank L. Netti, a financial advisor and CIMC with Wachovia Securities in Syracuse, New York, figured it was time to put pen to paper and spread the word about the importance of financial advice. In his new book, Retire Sooner, Retire Richer: How to Build and Manage Wealth to Last a Lifetime (McGraw-Hill), Netti provides retirees with a lesson plan on what types of insurance they’ll need in retirement, ways to improve their money-management decisions, how to make the best use of their retirement distributions, how to use a rollover IRA to leave more to their heirs, what type of advisor to use, and how to pay an advisor.
Netti believes advisors are ignoring an untapped market: middle-class American retirees. As advisors, “We’re all trying to serve the high-net-worth, but there are 10 times more people below the $1 million level in liquid assets that need an advisor’s help,” Netti says. With this book, “I’m trying to get Middle America turned on to financial advice and [to help them learn] how to build and monitor a relationship [with an] advisor.” The book is a must-read for advisors, Netti says, because it provides them with the inside scoop on how to deliver services to these retirees. I spoke with Netti about his book in May.
When and why did you decide to write the book? The book was developed when I was with First Albany Companies, a regional brokerage firm in New York. So it began as a book about New York state retirees. First Albany merged with First Union in July 2000, and then First Union merged with Wachovia last year. By then, the book was already done, but having moved from a regional to a national firm, I began to realize the scope of the book had to be broadened to include all states. And my theme came from seeing many retirees coming into my office early–between the ages of 54 and 62. So they were not qualifying for Social Security. They had to live off their pension distributions, 401(k)s and IRAs, and any savings. And at the top of the market in February 2000, I realized that you could not project double-digit returns for stocks; you could not guarantee those returns, and many people were ignoring less risky bond funds and buying equity investments. I said to myself, “Well, these retirees, if they are retiring earlier and living longer, might be talking about a 30- or 40-year money management plan.”
You advise retirees to use an endowment fund approach to retirement? While I was studying for the Certified Investment Management Consultant designation, there was a study of how endowments and retirement plans manage money for a long period of time, with the purpose of not running out of money but to grow money and get a steady form of income. And I said, “This is what retirees need to do: take an endowment-plan type of investment approach and because of their longer life expectancy and savings years, they’re going to have to take withdrawals for many years.”
So most pre-retirees and retirees don’t seek out professional advice? That’s right. And they don’t know how to judge if that financial advice is the best. Ninety percent of the retirees that I work with had never worked with an advisor before. They’ve built up these large monies in 401(k)s on their own with education from the company or through what they’ve read. And at least 90% of them have not worked with an advisor on a relationship level that this book introduces. If [retirees] take an endowment approach and become their own CFO, they’re going to use professionals to help them better allocate assets, and then use professionals to help them invest and monitor those securities. The client needs this relationship with professionals, just as the endowments do. Now that people are living longer and retiring earlier, they, like endowments, are managing money much longer if they want to leave money to their heirs. The endowment way of managing money should apply to almost every retiree with more than $200,000 in assets to manage.
The book is written for the retail client, pre-retirees and retirees. How can advisors pick up this book and learn from it? Advisors are going to get a great deal out of this book. They can use this book to build a practice to serve pre-retirees and retirees, because they’ll know where [clients are] coming from and can learn how to protect clients from running out of money.