Bucket Theory Helps Clients Sort Out Retirement Goals: Juliano, Birke at RIS

How can bucket theory speak more effectively to retired clients’ inner goals? That timely question was tackled by Kol Birke and David Juliano of Commonwealth Financial Network in a tag-team presentation at the 5th annual Retirement Income Symposium in Boston on Thursday morning.

Positioning Yourself as a Retirement Income Guru

Juliano, a senior advanced planning consultant, kicked off the “Psychological Benefits and Technical Hurdles of Retirement Income Buckets” presentation by reviewing how advisors can set up their practices to position themselves as retirement income specialists.

In the accumulation phase, your clients’ (and your) chief concerns were market loss and inflation, while in the retirement income phase these issues also include healthcare costs, outliving assets and ensuring adequate survivor income. Juliano pointed out that even clients who have worked with you for years will be wondering if you know their optimum Social Security claiming strategy, or can tell them in what order to liquidate their investments.

Achieving the typical interlinking objectives of lifetime income, legacy goals and asset protection means dealing with many moving parts, such as Social Security, pensions, qualified and nonqualified plans, annuities and deferred compensation. That’s a lot to juggle, and it may mean your client’s retirement phase is more service-oriented even though the assets you manage are dwindling. Advisors need to develop a scalable approach to managing this complexity, Juliano said.

Helping Clients Make the Best Decisions

Birke took over to address the bucket approach as a way of framing retirement asset allocation in a client-friendly way. Since people prefer guarantees to probabilities, instead of showing them a pie chart with a 10% cash allocation, you can talk about a “bucket” of guaranteed income for the next three years. Other framing tips: 

• Instead of “retirement,” which suggests an ending, use “financial independence,” which suggests a beginning;
• Instead of “equity exposure,” use “investments for potential growth;”
• Instead of “self-insurance” for long-term care, which sounds mandatory, use “self-funding,” which sounds discretionary.

Birke also explained that getting a message across is a combination of factors: the words you choose (about 7% of total impact), the way you say them (38%), and your body language (55%). You don’t have to be an expert at this in order to improve customer understanding, satisfaction, and eventual referrals, but you’ll outperform most other advisors if you just become incrementally better each time you speak with a client.

A new model of data gathering is also part of helping clients make better decisions, Birke said. This includes: