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What Retiring Clients Need From Advisors (That Robos Don’t Do)

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A return is a return is a return, says Ron Mastrogiovanni, president of HealthView Services and a financial services veteran. Rather than focus clients and prospects on how you did versus the market benchmarks, give them meaningful information on retirement.

“How do we most effectively compete with robo-advisors?” asked the speaker late Thursday during a session at the Retirement Income Industry Association fall conference in Indianapolis. “You don’t want to compete on returns. That comes down to benchmarking, and it’s a 50-50 chance that you’ll beat index.”

What can advisors do to most effectively compete? Move the focus over to the liability side of the balance sheet, for example, and discuss paying for health care costs, says Mastrogiovanni, who is chairman of the board for Bennington Asset Management. And on the assets side, consider sharing basic Social Security information with clients and prospects.

“It’s the other services that robo-advisors cannot provide that investors and consumers are looking for. This is truly addressing the needs for those looking towards retirement,” he explained to moderator Robert Powell, editor of the “Retirement Management Journal,” and an audience of about 150 advisors and other financial services professionals.

Reality Strikes

Upon retirement, individuals have to pick up a host of health care policies and start paying different premiums.

“Health insurance in retirement is so different than in pre-retirement,” Mastrogiovanni said. “When you’re working, employers pick up about 75% of the premium costs on average. Retirement comes with a different landscape.”

In fact, HealthView Services’ latest data report concludes that an average healthy couple retiring this year at 65 needs about $266,000 to cover Medicare Parts B and D and supplemental insurance in retirement. When additional coverage for vision, hearing and dental are added, along with copayments, this figure jumps to $395,000.

The couple is looking at annual expenses of about $11,300 in 2015-2019. However, the annual figures rise over time due to rising needs and health care inflation, and it reaches a high of roughly $31,100 per year in the 2035-2039 period.

Medicare surcharges (also known as “means testing”) also are important to factor into financial planning. These income-based surcharges could affect 25% of participants by 2036, HealthView Services states.

“Today, some retirees are spending about 36% of their Social Security on B, D and gap coverage,” the expert said. “But Generations X and Y may have to spend 100%.”

(Medigap coverage, or supplemental insurance, is intended to help seniors cover co-pays and other costs not covered by Medicare.)

Devil in the Details

“How far into the leaves does an advisor need to get to satisfy client needs” for health care and retirement planning? “We have been doing this since 2008 and have a lot of data,” Mastrogiovanni explained. “We are finding that your clients want help from you with these issues.”

He cautions that those without the proper licenses related to health care should not advise clients on specific insurance policies, “but you look at the Medicare site for details and provide that information to clients.” Also, each state regulates health care insurance, limiting the number of vendors who offer gap coverage; finding information on the least expensive policies can be done online. “They are generally the same … except when it comes to price. That’s become important,” Mastrogiovanni explained.

Clients are looking for help – but in the right quantity.

“The more details you give you’ll find that you can lose clients real quick,” he stated. “They don’t want you to be a health care salesperson. But they want basic information. That makes the most difference and makes the relationship you have with the client the most productive,” he shared.

Costs can really vary from state to state – including those that are close to each other, like Massachusetts and New Hampshire or Florida and South Carolina.

Again, such details can really make an advisor stand out in the crowd.

“People can’t live on Social Security anymore, so they have got to aggregate assets. Many of them are not necessarily going to do that with a firm that’s got big name recognition. But they will do that with the advisor that works with [them] on what’s most important – health care, housing and things like that,” Mastrogiovanni said.

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