“If you fail to plan, you are planning to fail!” is how Benjamin Franklin memorably put one of life’s key challenges.
That idea takes on enormous significance over two centuries after the quote attributed to our founding father at a time when some 10,000 Americans each day are entering a life phase — the 30-year retirement — that didn’t exist in Colonial America, or even the America of just a generation ago.
And that’s where Karen Wimbish comes in.
As director of retail retirement for one of the largest financial institutions in the country, Wimbish’s evident passion for planning — which came through in an interview with ThinkAdvisor in her executive suite at the Wells Fargo Center in Charlotte, North Carolina — has some impact on Americans’ finances.
After all, Wells Fargo serves one in three American households, through its banking, consumer credit, advisory and other financial services.
And the message Wimbish wants to convey to her firm’s more than 15,000 financial advisors who manage over $1.4 trillion in assets is that “having a plan makes you feel better; knowing is power.”
For advisors, that means “you can develop some kind of plan for their future; not just to retirement, but through retirement.”
To that end, Wimbish has sought to build on her firm’s service-marked Envision planning process, which advisors use with accumulation-phase clients to prioritize their goals, identifying their Plan A preferences and Plan B acceptable outcomes if their investment targets or other assumptions don’t pan out.
The result, after a beta testing over the past year, was the unveiling this month of Wells’ Income Center, whose goal is to answer retiring clients’ question, as Wimbish puts it:
“Where is my paycheck going to come from — how much from Social Security, how much from traditional portfolio interest and dividends, and how much will have to come every year from sales of my portfolio?”
That last part of the question generated gasps in the firm’s past year’s trial run. Turns out that clients theoretically understand as they’re nearing retirement that there will be a process of portfolio drawdowns, Wimbish says.
But when advisors show them that each year they will be selling X amount, quite a number of clients exhibit profound discomfort with the idea and spontaneously suggest reducing their spending goals so as to limit the apparent depletion of their accumulated wealth.
“It’s [clients’ reaction] behavioral finance, and nervousness” that she suggests is still deeply felt after the experience of the 2007-2009 market crash.
“People are still very, very wounded from that period, and if you think about people in their 50s who may have lost their home, their job, and a segment of their savings, they’re in the market but they’re not confident in the market. They are very cautious and I would say uncomfortable about the fact that that’s where they have to be.”
That gloomy sentiment is not merely impressionistic, but rather the result of data from an investor and retirement optimism survey Wells Fargo puts out quarterly with Gallup.
While the third-quarter results showed the optimism index at its highest point in just under seven years, having surged 17 points from an index value of 29 to 46, the current optimism is well below the pre-2008 12-year average of just under 100.
Sentiment among retired investors was markedly worse (index value of 30) than non-retired investors (50) among the more than 1,000 investors surveyed.
“They’re saying that the nest egg they were counting on is not going to come back in the time I need it to,” says Wimbish, who adds that while Americans perceive that the economy as a whole is doing better, respondents took a dim view of their own finances.
A majority (56%) of non-retired investors with less than $100,000 invested, for example, feel that their incomes have peaked. They think they’ll be in “the same or worse” condition at retirement.
The sentiment is worse for wealthier Americans with more than $100,000 invested, 61% of whom feel they have “hit the wall on income growth” and will never achieve greater earnings.