Retirement Reset

A few things have “hit that model hard,” Dychtwald says. First, life expectancy has continued to increase; living 25 years after retirement is no longer a fluke.

“How many people do we know in their 50s or early 60s that have so much money that they can afford to stop working and still live for another 25 years on their savings?” he asks. “Not many. People have also had enough chances to watch people play out their retirement to see what happens; it’s an experiment that has come alive. They’ve watched their moms and dads, grandparents, aunts and uncles. For high-energy, stimulated and stimulating people, retirement is boring. It’s simply not satisfying. They’ve looked at their retired relatives and said, ‘That’s not for me.’”

The survey

Hard data backs Dychtwald’s narrative, and the survey finds that client attitudes toward retirement (and their future in general) are surprisingly positive given the broadside they recently took. Key highlights include:

• Today, 54% view retirement as a new chapter in life, rather than a winding down—a significant increase over the 38% that held a similar view a decade ago.
• However, retirement is being postponed: Pre-retirees say they now intend to delay retirement by five years—from 64 to 69—triggered in part by increasing longevity, as well as the recession and financial need.
• Retirement no longer means the end of work: Almost two-thirds say they would ideally like to remain productive and include some work in retirement to stay active and involved.
• Financial peace of mind is now six times more important than accumulating wealth: 82% name it their key financial goal.

“That 54% of Americans now see retirement as a whole new chapter of their life is huge,” says Larry Roth, CEO of Advisor Group. “They’re saying, ‘What do I want to do now that I don’t have to work?’ Or, ‘Do I want to redefine retirement to include working part-time, working full-time, working in shifts or maybe one or two seasons a year?’ To me that’s a big change. Ten years ago, only 38% held this view.”Roth notes that although investors are optimistic and excited about retirement, their optimism is tempered by sensible concern.

“Ten years ago, no one was thinking about what was happening in Europe, and nobody knew what PIIGS were,” he adds. “It was something that you might get in a grocery store if you were hungry for bacon. Today, they’re more optimistic about longevity, health care, where they would like to live and the way they’d like to spend their time.”

But, he says, they’re also much more aware of their environment from an economic standpoint. They’re aware that living longer will cost money; they’re learning that their kids moved out, but are still “on the payroll.”

“They’re aware that they need to be much more astute investors, just like they are more astute about diet, exercise and eating right.”

And this, according to Roth, is the opportunity for advisors.

“This is as exciting as it gets; this is the biggest opportunity for financial advisors ever,” he says with no hint of hyperbole. “Even more so than they expected.”

The reason, he says, is that 10 years ago the trend was moving toward “do-it-yourselfers,” even during the tech implosion. But after the market ride of the last few years, they’re realizing it’s difficult to do and that, maybe, Roth says, they not very smart about it either.

Dychtwald agrees, noting, “In almost every conceivable way, people who had a financial advisor in their corner turned out far better than people who tried to do it themselves. We asked in the survey if people are displeased with their advisors after what’s happened this last decade. Fully 68% of people who had advisors said that they felt they were far better off than [they would be] had they done this themselves. And only 4% feel they would have been better off being on their own.”

“This is the most exciting part about it,” Roth says almost giddily (for Roth anyway). “Many of the advisors we work with have been in business 20-plus years. When they got into the business, they were in the early stages of independent financial advising. They invented their own niche and ‘learned on the job.’ Now this next generation, or next leg up, in financial advising is here. The advisors who are in the best position to take advantage of it own a practice and have confident, knowledgeable staff with the required expertise.”

But like investors, Roth’s optimism and enthusiasm is tempered with concern.

“One area that worries me, just a little bit, is that entrenched advisors have built their businesses primarily around asset accumulation,” he says. “Keep in mind, we found 10 years ago that most advisors thought they were in the retirement planning business because they simply helped with accumulation and rollovers. Now, however, it really is about retirement income.”

As a result, highly successful, expert advisors need to take a second look at their business model to see whether or not it’s designed for retirement income, Roth suggests.

“Many will want to change their model slightly to accomplish both, and I think that’s the big, big change. The survey shows that the majority of people going into retirement don’t have a financial advisor. They know they have a need, and they know they have a problem, and they think they know what to do about it, but they don’t even know where to start. They’re going to seek advice.

“I’m sorry to be extra enthusiastic,” he says self-consciously, “but I think the stars are in alignment for the first time ever; it’s pretty cool.”

One final question; are plans in the works for another survey in 2021?

“That’s interesting,” he says. “I don’t have any plans for that, but I will tell you between now and then, if people in our business don’t prosper, they should just take a hard look in the mirror.”

“I’ll tell you this and I don’t think I’m wrong about what I’m about to say,” Dychtwald adds. “There’s never been a more robust opportunity in front of the financial services industry as there is now. This is the perfect storm.”