Retirees Need Advice Too

This mindset and the expectations that they will be able to maintain their present quality of life translate into opportunity for financial advisors. We know that because our wealth management survey tells us what financial products they are thinking about purchasing over the next three years–expect them to be cautious. Sixty-seven percent say “it is important to preserve the safety of my capital, even if it means accepting a lower return.” In addition, 90% already report holding stocks, 82% have invested in IRAs, 78% have mutual funds, 70% have bonds and 62% own life insurance, so they are knowledgeable about financial services and their products.

So what are they looking for? In answer to a question “are you interested in obtaining any of the following within the next three years,” they made it clear they will not be standing pat. Fifty-one percent said they are interested in buying more stocks, 35% will consider additional mutual funds and 35% will consider purchasing bonds. It appears IRAs are of lesser interest, presumably because they already own those vehicles.

Interestingly, the survey also shows minimal interest by respondents in annuities, perhaps because they view that product as a wealth accumulation vehicle. This seems to present advisors with an opportunity to educate the wealthy retirees on the payout features of annuities, where they can lock in a retirement income stream for life. In fact, 75% of those surveyed said creating a steady income stream for day-to-day expenses that will last long enough is their most important goal during retirement, so they need to know how the product works.

These respondents also express little interest in life insurance, but again that means opportunity. There is additional room for the strategic use of life insurance in estate planning. The survey found 28% of these retirees do not have an estate plan, and 17% say they expect to put such a plan in place. In addition, while more than 70% of retirees have an estate plan, 36% say those plans were implemented more than five years ago. Perhaps those plans need to be updated. It seems they are ripe for education on this issue.

They are watching the estate tax repeal debate because 78% of the retirees said they are “slightly/fairly or very knowledgeable” about that debate before Congress. But, they are pessimistic that the drive to eliminate the tax will succeed as 42% say they do not believe that levy will be eliminated after 2010, and 37% are unsure whether the repeal will become permanent.

And, while their primary financial goal, even in retirement, is to assure a comfortable standard of living during retirement (69%), they also report they are interested in leaving their estate to heirs (43%) and protecting their estate from taxes (36%).

What do all these numbers mean? It is clear the high-net-worth retirees are looking to be active in the equity markets. They are looking to continue talking with advisors to help them recover from the losses and difficulties of the past three years. They are at a stage in their life when they feel they have time and knowledge to take advantage of all the counsel professional advisors can provide. In fact, 67% say they will seek the opinions of financial planning professionals as they plan during retirement, even though they will make the final decision on where to invest. Only 5% say they rely entirely on professionals.

While some advisors may be wary about approaching retirees based on market performances over the past three years, this market segment wants continued counsel. They are pleased to have achieved a certain level of financial security, and they like the fact that money has given them independence (81%), allows them to provide for their loved ones (80%), and enables them to have a certain level of freedom (61%).

That is not the mindset of a group that is looking to sit back and do nothing. They think financial planning through retirement should not go away. Ninety-three percent said they feel flexibility in the management of their wealth is key to managing and growing it. Help and advice from their advisors is appreciated and financial professionals should be keeping in touch with this group–even after they have left the workplace.

Walter H. Zultwoski is senior vice president, marketing and market research for The Phoenix Companies Inc., Hartford, Conn. He can be reached at walter.zultwoski

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 4, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.