What’s to be done? It’s a loaded question everyone is asking in the wake of the S&P downgrade and resulting market volatility. In our case it refers to retirement income protection (or the lack thereof). The person to draw the short straw in answering is Tim Noonan, managing director of Capital Markets Insight with Russell Investments. Only to our surprise, he’s more than willing to answer and has been preparing for the question for quite some time.
Noonan, (left), has a new book, “Someday Rich,” which sheds light on what’s happening. He’ll also be a keynote speaker at Investment Advisor’s Retirement Income Symposium October 17–18 in Boston.
We’ll begin with the easy question—what’s to be done?
What’s going on is an echo of why I wrote the book. It details the need for a new way to financially plan and offers a radical redesign for client engagement. No longer can we look at advisors as Sherpas trying to achieve ever higher rates of client returns on the investment equivalent of Mt. Everest. Everyone agrees at this point that the approach isn’t working. Both advisors and clients are open to doing things differently. The problem is that few people know what that is.
So what is it?
For wealth managers who are relationship- and process-focused, they need to begin to look at funded ratios rather than return targets. If they don’t look at it this way, they can’t really deal with the anxiety of whether or not clients are on track to meet their financial goals. We engaged Matt Greenwald of Mathew Greenwald and Associates to help us, in turn, help wealth managers when reaching out to their clients in this way. Together, we developed three questions wealth mangers should be asking: The first is, “Do you even know what the lifestyle you envision in the future will cost?” The second is, “What are the chances you will run out of money and outlive your assets?” The third is, “How can you make sure that each aspect of the nest egg you’ve developed is being optimized?”
The questions hopefully lead advisors and their clients in addressing twin goals; achieve the lifestyle clients want, but achieve it in a sustainable fashion.