The number of boomers who have assets spread all around is “amazing,” says Robert Graham, CEO and president of RG Capital LLC, Scottsdale, Ariz. “They have an average of 3 financial advisors each.”
By retirement, “some older people even forget what they have,” he continues.
Some boomers do try to coordinate these various accounts, assets and relationships with their retirement plans, say professionals interviewed for this story. And some do try to manage the related statements, reports and other materials.
But self-coordination rarely occurs, advisors say. Over- and/or under-allocation can result, and this can “wreak havoc” on the retirement plan, says Tim Johnson, a fee-based financial planner who is also chief investment strategist at Lincoln Financial Advisors, Nashville, Tenn.
So what are financial advisors to do?
Consolidation of assets, accounts and/or advisory services is the solution often recommended–as a way to simplify the paperwork, increase efficiencies, assess/balance risk, and streamline retirement income management.
As boomers near retirement, in fact, banks, mutual fund companies, insurers, advisors and debt companies increasingly nudge boomers to consolidate in one way or another–by account, product type, or advisor.
But the C-word is a flash point for many boomers, say professionals.
Boomers don’t want to consolidate because they say they’ve spent their entire lives avoiding putting all eggs in one basket. They say it’s “too risky.”
What’s more, some are “conflict-averse,” says Graham. They don’t want to have to tell an old advisor or provider that they’re moving assets to a new advisor or firm.
So, the real question for advisors is, how to address the diversify/consolidate equation with boomer clients?
It is the advisor’s job to demonstrate the value of consolidation, says Graham. The advantages may include simplification of the information and one point of contact.
There are benefits to diversification, too, says Johnson. But there is a “large disadvantage” if a boomer tries to diversify advisors, not types of financial assets, he says, especially when entering retirement.
“It is vital that some professionals know where all the money is being allocated and what risk levels the client is assuming,” he explains. “Without that, no one is captain of the ship or looking at the big picture.”
Diversification needs to be done with realistic targets and performance expectations and in a way that fits the boomer’s own situation, stresses Barbara Sullivan, a communications strategist and managing partner at Sullivan & Company, New York. Financial professionals endorse it as the preferred financial management approach, she indicates.
Specifically, she suggests advisors do this by consolidation with one financial advisor. This “makes it easy for the client, as there is now one point of contact, while the assets can remain diversified” as governed by the plan, and the client can still receive statements from the individual providers.
“Show the boomer that you can have money in many places and in different types of investments, but the custody of the accounts can be with one advisor,” she sums up. Also, discuss how this won’t impact the security of the money or the boomer’s financial safety, she suggests.
Sullivan recommends a 3-point approach: Make consolidation relevant to client needs; make it easy for the client in a way that mitigates risk; and be proactive about staying in touch with the client.
What advisors should not do is present consolidation by product, she says. “For instance, don’t start out by saying, ‘let’s go with one mutual fund company so you can get the break-points on the charges.’”
That’s a product consolidation, and it does not work, she says. “Rather, sell your ability to tailor solutions to the boomer’s needs.” If getting mutual fund break-points makes sense for the plan, she allows, that’s fine. “But remember that any break-point is minor in comparison to the impact that a well-diversified and coordinated plan has on client goals.”
As for proactive contact, Sullivan says that advisors who custody assets should stay in touch after consolidation.