Top 4 Reasons You Better Discuss Social Security With Clients

It would seem to be a no-brainer that financial advisors should include Social Security in their clients’ financial plans, but according to a Nationwide Financial survey of U.S. adults age 50 and older, that’s often not the case.

The survey of future and current retirees found that only 52% of respondents who expect to retire within the next 10 years got advice from their advisor about Social Security, meaning half of those advisor clients didn’t.

That’s a major omission in financial plans and a big miss by advisors, says Dave Giertz, president of distribution and sales at Nationwide.

“To build a holistic financial plan, especially retirement income plan, you have to consider all the inputs for income and all the potential inputs for expenses,” he said. “Clearly Social Security and health care costs tie into that in a huge way.”

Of those Social Security discussions that did take place between advisors and their pre-retiree clients, just 45% were initiated by advisors; the majority were broached by clients (45%) or a family member (6%).

There are many reasons why financial advisors should include Social Security in clients’ financial plans, especially those nearing but not yet in retirement. Here are the primary reasons, according to the Nationwide survey:

1. Advisors risk losing clients if they fail to include Social Security in their clients’ financial plans.

Seventy-six percent of pre-retirees working with an advisor — or planning to — were somewhat or extremely likely to switch to an advisor that would show them how to maximize Social Security benefits.

Even many retirees already collecting Social Security were likely to change advisors in order to collect the maximum Social Security payment. Fifty-four percent of survey respondents who were retired for 10 years or less – classified as “recent retirees” – and 35% of those retired for 10 years or more – felt that way.

2. Many clients are uninformed about Social Security; they need professional advice.

Almost one-third of future retirees guess or don’t know how much their benefit will be, and many underestimate how much Social Security they will be able to collect. That can play havoc with their retirement plans and quality of life in retirement.

Almost one-quarter of recent retirees surveyed reported that they received less Social Security than they had expected. Among those retired for 10 years or more, the numbers were more dramatic: one-third received less payments than expected, and that represented a substantial increase from the previous year when only 22% felt that way.