When my father died in 2002, he had a brokerage account. The broker, with one of the biggest wire houses, had him invested in some of the most aggressive stuff you can imagine, and Pop lost about $200,000, more than half of his savings. Even if he had lived until March 2003, when the market began to correct, the nutsy stuff the broker had him in would not have recovered much, if at all.
When folks are in their 80s, assuming they are not plugged into the market, should they be in an aggressive investing posture? I think not. They may not have the time required to survive the bear market. That could apply to anyone in their 60s or 70s, too. It’s all relative — how much do they have? How is the mind working? And is income set for one or two lifetimes?
That’s one good argument for the living benefits inside modern investment annuities, isn’t it? They give us investment professionals a fallback position for our customers. There are even annuities out there that have automatically increasing benefits.
Even so, it’s probably best not to be too aggressive in investing for people who are retired. Keep my father in mind. Think how you might feel when the children ask why you were so aggressive with their father or mother. And, if you are at all interested in doing work for said children, you might want to develop a relationship with them before anything happens, right?
A living benefit annuity for my father would have been perfect. Even so, it would not need to be arranged in a super-aggressive way. (Yes, I know you might say that there’s no need to be unaggressive when there is a living benefit, but that argument does not hold much water if there is an emergency need for a large cash withdrawal, does it?)
Have a great week and think about how you can best protect your aging clients. One thing you can do is visit with them periodically — FINRA might say this is part of knowing your customer.
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Readers may write to Richard Hoe at Richard Hoe Investments, LLC, 5801 East 41st Street, Suite 715, Tulsa, OK 74135-5629, or email him at firstname.lastname@example.org. Mr. Hoe, an investment professional for 42 years, is a member of Prosperity Network’s five-person investment team, as well as an investment advisor representative and registered representative. Paul Ewing’s Kansas City-based Prosperity Advisory Group has over $2 billion in AUM. Mr. Hoe has been writing professionally for more than 50 years and is a member of the adjunct faculty at the California Institute of Finance, a graduate school at California Lutheran University that offers an M.B.A. in financial planning. He holds five designations, including Chartered Financial Consultant, Chartered Life Underwriter and Accredited Estate Planner, and is a member of both the Society of Financial Service Professionals and the Financial Planning Association. He helps edit each edition of Andy Kilpatrick’s “Of Permanent Value,” a book about Warren Buffett and Berkshire Hathaway published yearly in advance of each shareholder meeting.
This information is intended for financial professionals only, not the general public. This is not a solicitation to buy or sell any specific security. Mr. Hoe may have positions in the securities or other investments discussed. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions, and when sold or redeemed, one may receive more or less than originally invested.
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