What retiring clients need from advisors (that robos don't do)

“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 percent 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 percent of participants by 2036, HealthView Services states.

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

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