The race for rollover assets is on now that baby boomers have begun to enter retirement and to transition from accumulation to distribution of their assets.
In response, investment professionals are focusing on products and services that can help, in areas like estate planning, potential future health care need and longevity risk.
Most are well aware that planning for retirement goes beyond simply investing a set amount of money each month. What some may miss, however, is that true financial planning means looking beyond the portfolio to what the client truly desires in retirement. By helping pinpoint what will drive client happiness in retirement, professionals can then create a financial plan suited to actual needs.
Smart investment professionals know there is no one-size-fits-all retirement.
Just as individuals differ in career choices, dream vacations and spending habits, they also differ greatly in retirement expectations. Helping clients identify personal priorities and their ideal retired lifestyle will go far in ensuring their happiness throughout retirement–and in securing the advisor as a strategic and trusted investment professional.
But how to assist clients when it comes to personal happiness drivers? Are there ways to help clients determine what’s important to them not only for the first year of retirement, but for the entire 10, 20 or 30 years they may spend there?
One recent study found that individuals who are near or in retirement can be grouped into 5 segments based on what they want and expect.
For example, the “High-Timers” segment, representing 34% of the 467 respondents, want to maintain a very nice lifestyle throughout retirement. This includes wanting to be able to afford the “extras” for as long as they live, according to the Retirement Decisions study, which was conducted for Nationwide Financial, Columbus, Ohio, by Mathew Greenwald & Associates, Washington, D.C.
However, the High-Timers are not as concerned as other segments when it comes to providing financial support for their children or leaving an estate.
By comparison, the “Self-Sufficients” (17% of the Nationwide study) want to maintain their current lifestyle but are willing to give up some luxuries. They also place a higher priority on staying in their homes than other segments, and they are more likely to be retired already. (See chart for all segments.)
How can investment professionals benefit from these findings?
Begin by noting that while the segments do not differ much by income, the accumulation needs for each do differ. This underscores the point that there is no single accumulation target for each segment, let alone each individual.
The investment professional who helps clients carefully determine retirement needs and then establish accumulation targets to meet those needs will be of great assistance.
But what’s the best way to do this? Using this 5-step process, a professional can help individuals conduct a self-assessment and then move on to planning.
1) Challenge clients to ask themselves what’s most important to them in retirement.
2) Help clients determine how much it will cost to do the things that are important to them. This is complex because retirement horizons can now last 30+ years.
3) Help clients prioritize, and then guide them to decide whether their goals are worth the cost. What are the trade-offs?
4) Help clients figure out how to accumulate and sustain assets. Offer specific products or plans based on these specific goals.
5) Help clients maintain their goals. Once retired, clients must track assets to make sure they retain enough to continue to do what is important for the rest of their lives
Going through this process with boomers deepens the advisor’s value and service, even as it helps clients reach–and afford–the retirement they desire.