A likely plea from your clients of advanced age: Please don’t call us “elderly,” “seniors” or even worse, “senior citizens.” And would you kindly drop “golden years” and “silver tsunami” from your lexicon too?
Those terms turn off folks age 65 and beyond. Instead, embrace the less irritating “older adults,” “older Americans” or “retirees”—if you must identify them by age at all.
The fact is, however, that by 2030, about one-fifth of the U.S. population will be 65 or older. And by 2032, that cohort will outnumber children under 15. It is therefore essential to key into this unprecedented, ever-growing important demographic.
“This is not business as usual. There has never been a time in history with a more seismic opportunity in front of the financial services industry in terms of millions of people needing help, guidance and motivation. This is going to be the golden age of financial services,” says Ken Dychtwald, psychologist and gerontologist, and CEO of Age Wave, a think tank based in Emeryville, California.
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It isn’t just the expanding number of older adults; it’s their longevity, the complexity of choices—retired, still at the job, embarking on a different career—as well as uncertainty about entitlements down the road, that have created a critical need for financial advisors.
“As people are living longer, retirement planning as we know it is being replaced by longevity planning,” according to MIT AgeLab, a research program at the Massachusetts Institute of Technology.
Indeed, the aging population is a great asset and a splendid opportunity. These still-active men and women are eager to buy innovative products and services designed specifically for them and which represent new sources of revenue for businesses.
Already, a number of entrepreneurs have set their sights on this mushrooming demographic. There are, for instance, smart watches, replacing lockets, that alert a family member in event of emergency; they also remind wearers when to take their meds. Another company is marketing debit cards with dollar limitations that also notify a relative of alarming, outsized withdrawals.
Financial advisors are surely in the catbird seat when it comes to helping older clients manage and plan.
“The earth has moved, and it’s moved in the way of shifting age. The aging population is one of the biggest trends not only in America but in the world,” says Paul H. Irving, president of the Milken Institute, in Santa Monica, California, and editor of “The Upside of Aging: How Long Life is Changing the World of Health, Work, Innovation, Policy and Purpose” (Wiley, 2014).
Irving continues: “We’re in the very early stages of massive cultural change. Those who recognize that relatively early will have extraordinary opportunities to grow their businesses. Those that don’t will look back in 10 or 20 years and see that they’ve been left behind.”
In particular, the financial services industry “has so much potential to do good for society, and in the bargain, dramatically improve its own competitive position and attract additional AUM,” he says. “I don’t think that any company has figured it out yet. But those that do, have a windfall ahead.”
Bank of America-Merrill Lynch is getting a leg up with the appointment of what it calls an industry first: a director of gerontology, Cynthia Hutchins. She is a former FA with the firm who specialized in retirement.
“We’re turning a cruise ship in changing [our] advisors’ mind-set as to the things they need to be bringing to the forefront in client conversations,” Hutchins says. “Much more so than in the past, [aging] clients need financial advisors to help them, and advisors need to pay attention to how financial planning for these clients has changed as a result of longevity, including the major cost of ongoing health care.”
Contingency plans are absolutely required. For instance, what if the client must retire earlier than planned because of illness? Or because they need to be a full-time caregiver to a family member?
“If you retire earlier because of caregiver demands, you stop contributing to your retirement plan. Advisors need to bring a contingency plan to light,” Hutchins notes.
In serving older clients, the issue of cognitive decline becomes a reality. As difficult and unpleasant as that is to discuss, it must be brought up in relation to investing.
Much of the decline is associated with physical manifestations, such as mini-strokes, which often aren’t even noticed. Cognitive decline is partly responsible for older people’s greater susceptibility to financial scammers; also, they are more easily influenced by those who gain their trust.
“Cognitive decline is something that financial services—and the broader population—are just starting to get our arms around,” Hutchins says.
Studies show that, as cognitive abilities decline, confidence in investment decisions, unfortunately, rises.