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Retirement Planning > Retirement Investing

The end goal remains the same

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In our research, we’ve learned that boomers want safer options, with more predictability. We have heard from financial planners who sense that people are returning to basic principles when it comes to money: Maximize your savings, limit your use of credit cards, keep a substantial emergency fund, know how much risk you can tolerate, diversify your investments; and don’t try to shortcut your way to wealth.

It’s sound advice our parents probably gave us boomers (which we ignored). There is evidence that this safer approach to investing will impact the equities market for years to come.

Stocks drop

Only 45 percent of U.S. households owned stocks or mutual funds by 2008, down from 53 percent in 2001, according to the Investment Company Institute, a mutual fund industry trade group. As boomers reach retirement age and start to cash out, the number will stay low.

The well is dry. Even as portfolios begin to recover, consumers are left with smaller home values and debts accrued during the boom years. If they spend less and save more, as many predict, the impact on corporate profits will dampen stock prices for years.

If the consumer has moved when it comes to investing, have you moved, too? Building trust requires knowing the mindset of your clients, and their thinking has changed.

More evidence: According to a recent study by BlackRock, one of the world’s largest investment managers and advisors with $1.4 trillion in assets under management, 70 percent of boomers say they’ll change advisors if their advisor can’t help them make their money last. That’s a change from focusing on building wealth and a retirement nest egg. Now, making the money last is not an easy trick.

Financial brain surgery

“This is the equivalent of financial brain surgery,” said Frank Porcelli, of BlackRock, adding advisors would have to manage clients’ spending expectations as well as investment performance.

For those clients at or nearing retirement age (whatever that is these days), it is job No. 1 to talk with them about strategies to avoid running out of savings.

That’s because the current mindset is all about protection against downside risk. That protection comes with a cost?less upside. The bottom line for many boomers could be a retirement lifestyle that is less grandiose than they anticipated. The money only goes so far.


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