Morningstar released a terrific report by Danielle Labotka called “ Why Do Investors ‘ Break Up ’ With Their Financial Advisor ?” The report reveals the complex array of reasons for the disconnect , laying the blame mainly on poor communication . Nowhere in this business is the communication more off-target than it is in retirement planning .
Morningstar isn ’ t the only one pointing out the disconnect between investing services and planning advice . J . D . Power piled on with a report , also in April , noting that investor satisfaction with full-service advisors continues to slide . ( On the consumer insight company ’ s 1,000-point scale , investor satisfaction with advisors had fallen 17 points year over year to 727 .) The company says the culprit is the “ systemic problem ” in wealth management in which advisors focus on investments while clients are seeking more comprehensive advice . The study shows 42 % of advisors delivered transactional advice , 47 % delivered goals-based advice and only 11 % provided comprehensive advice .
The leaders we talked about at the beginning of this article are standing out because their competition isn ’ t delivering these things the clients are actually asking for .
Solving For The ‘ Trimesters ’ Of Retirement
Retirement isn ’ t an event . It ’ s a journey in which people move on to face new developments and challenges . Every retiring client is a brand new traveler . And their trip usually happens in three phases ( or “ trimesters .”)
In the first stage of their journey , they are likely enjoying the best health and most wealth .
But no amount of money can insulate a family from failing health or cognitive ability . Retirees will turn to different priorities as they age — their money worries will give way to healthcare worries as they live longer lives and deal with more physical changes .
That ’ s when we get to the second and third phases . The second is what we
The most successful advisors are those building teams of professionals , teams comprising people with different talents .
might call the “ slow-go ” phase — when spouses or family members have become incapacitated . The third trimester is the “ no-go ” period when the client may be alone .
Longevity is inevitable but also manageable if you prepare for it , but most clients aren ’ t prepared for these second and third phases . They might say they know what will happen , but they likely have chosen to avoid the blunt truth about incapacity and disability , even if they have older parents , relatives and friends who have grappled with sudden health issues .
Some of the issues are new to them , but won ’ t be to the best advisors , who have likely prepared them for critical life events when the clients themselves didn ’ t know what to do .
Author Ken Dychtwald , a gerontologist and the founder of Age Wave , said the idea of someone ’ s “ life span ” should be contrasted with their “ health span .” Consider that the life expectancy for Americans overall is 78.5 years , yet most people will suffer multiple chronic ailments for their last 12 years or so . That ’ s one of the takeaways from a study that Dychtwald collaborated on with Edward Jones . The researchers also noted that two-thirds of people age 65 and older suffer from at least two chronic conditions . And the authors found that by age
85 , nearly three-quarters of women are widows , and 36 % of men are widowers .
These are critical considerations , because physical health and cognitive health are critical determinants of older retirees ’ ability to live safely and securely .
But then consider that advisors don ’ t like to talk about longevity and health . Preliminary findings from a new survey of clients and financial professionals from the Alliance for Lifetime Income showed that 75 % of financial advisors do not discuss the risks of cognitive decline with their retirement planning clients . It ’ s not an easy topic . But it ’ s reality , and clients expect advisors to anticipate potholes in the road ahead .
What The Best Advisors Have Come To Realize
Now put all this in the context of an advisory business . Consider the solo advisor . How likely is it that they will be able to deliver custom and complex retirement solutions at the same scale they are selling investments ? No matter how loyal the clients , you can ’ t fly solo working with a retiring family .
That means the most successful advisors are those building teams of professionals , teams comprising people with different talents . One person might be great at investing but may not have the
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