As a financial advisor, you’re facing a big challenge: helping your clients prepare for a retirement that could last as long as their careers.
Thanks to such advancing technologies as artificial intelligence, big data, 3D printing, nanotechnology, bioinformatics and neuroscience, many of your clients are likely to live to age 100 and beyond — forcing you to rethink many financial planning assumptions that underpin the advice you’ve given throughout your career.
A baby born in 1900 was expected to live for just 47 years on average (or to their mid-60s on average, if they were lucky enough to survive past childhood). Today, childbirth and infancy is vastly safer, once-devastating childhood illnesses are all but vanquished, and life expectancy in the U.S. is around 78 — an impressive leap forward over the past century. Scientific breakthroughs in the near future are likely to accelerate those gains, leading more of your clients to longer, healthier lives than your current models might predict.
From reimagining portfolio allocations to creating estate plans for families with five or six generations, you’re facing a call to action: Adapt to this new paradigm or risk leaving your clients unprepared for the future they are increasingly likely to face.
The 60/40 glidepath is one obvious example of outdated advice.
By limiting equity exposure, and reducing it when clients reach age 65 — with 30 or 40 years of life yet to live — you could be forcing them to struggle in their efforts to keep pace with inflation. In short, a traditional 60/40 glidepath means their money might not last as long as they do.
And the challenge isn’t only about money. Longevity is also reshaping family dynamics, particularly in the timing of when and how your clients provide financial support to their heirs.
When people died a century ago in their 50s and 60s, their kids — in their 30s and 40s — got the house. But imagine what happens when a client lives to 100. Their kids are now in their 70s, a point in their own lives where the inheritance isn’t having as great an impact on them, compared to getting that money in young to middle adulthood. This means you need to help your clients rethink their estate planning, and begin to consider distributions now, instead of waiting until their deaths.
There’s also a growing need to plan for health care. You know that the older someone is, the more they spend on health care. One in three Americans over 85 has Alzheimer’s disease, a fatal illness that can easily bankrupt a family. This means you must help your clients plan for their future long-term care needs — an issue that is growing in importance.
And retirement itself is being redefined. Clients in their 60s and 70s have time, money, and experience — and they want to use it to become entrepreneurs, engage in philanthropy, and even return to school. With three or four decades of live ahead of them post-career, they have an unprecedented opportunity for personal and professional growth — but only if the financial plan you gave them anticipates and supports such ambitions. By helping your clients prepare for these possibilities, you can add depth and purpose to their strategies — and greater client loyalty than ever.
This shifting reality means longevity is the most transformative factor in financial planning today. You must adapt to it, to ensure that your clients can live fulfilling, financially secure lives.
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