to the designers , who rely on their knowledge of capital markets research and dampen the risks by using long time horizons to smooth variations . While it ’ s a rational , objective approach that generally works for the population at large , individuals might have problems with the risks of the design and its terminal points : Today ’ s retiring clients and plan participants have seen down markets — big ones — in 1987 , from 2000 to 2001 and from 2007 to 2009 , as well as some sharp corrections in between .
The late father of Steve Gresham , one of the co-authors of this article , knew nothing about markets or investing , but he knew when the stakes were too high for his peace of mind . He worked for universities his entire career and earned the negotiated benefits of retirement annuities . He surprised Steve by sharing that he had converted his 50 / 50 stock-bond plans to 100 % annuities with Steve ’ s mother as second life . He never looked again at the market . He cashed the checks , and now so does Steve ’ s mother at the age of 88 . Their definition of “ financial wellness ” was not having to worry about the markets , their income level , their ability to finance healthcare or their ability to age in their home . Done .
The clients of financial advisors often are looking for a certainty of outcome . If the client is analytical and satisfied by data , they might enjoy a risk matrix offering a percentage likelihood of success . But it ’ s unlikely more than a fraction of our clients are like that — especially not retiring couples and their families . In most households , there ’ s someone who values protection and guarantees over potential returns or capital market theory .
The household is the client . Most advisors dealing with a household talk to the typically male and financially confident household head . Their firms may realize they should be dealing with multiple generations of a client ’ s family — including the spouses , the adult children and aging parents — but they haven ’ t given their advisors the direction to do it . This demographic sandwich , the generation above and below your clients , will drive more than 80 % of advice industry profits through at least 2030 . Our success depends on both keeping our existing clients and consolidating the assets we don ’ t currently oversee but our competitors do . Client relationship management software will have to accommodate entire families for this reason , and we ’ ll need to coach and train associates to talk about and to clients about these other family members .
Your service models will have to be for everyone . And remember , each of these different family members will have a different idea about what “ peace of mind ” means and whether you can offer it to them .
Frank McAleer , a senior vice president of wealth planning at Raymond James , asks clients , “ What is the list of stuff you most worry about or that could go wrong as you live longer ?” And “ What about family members for whom you could become responsible ?” The answers will be dif- ferent for a 26-year-old 401 ( k ) plan participant and for a 62-year-old pre-retiree . Different still for their families .
For this you might have to create separate service models for different family members — with different levels of communications , pricing and product and service options . One family member might want the reliability of a paper account statement ; another might need the immediate transparency of a mobile app . When you have separate models , you can more easily and consistently focus on improvements for unique cohorts .
Wealthy families in particular expect their advisory firms , plan sponsors and plan administrators to offer a variety of models , including in-plan advice and fiduciary wealth management ( with trust services ). And if the past is any indication , those expectations will quickly spread to people in the mass affluent category and beyond .
Know how to implement . So how do you integrate “ well-being ” principles into your services ? It ’ s a matter of both will and skill .
You may or may not possess the empathy you need when a client ’ s talk turns to the needs of an aging parent or the need to pay off a child ’ s college loan . If you don ’ t , that ’ s a management problem for your firm , which has to make sure empathetic advisors are in place . Your will to do this might suffer still , ironically because of your success at the markets — stock rallies likely make your work look easy and lessen your enthusiasm for harder tasks , such as mustering the energy to reach three generations of clients in a household . But if you fail at that , you risk less trust and less wallet share .
Technology ’ s Role
The bad news is that “ wellness ” is not a widget companies can attach to their existing offering . That approach has been attempted with the best of intentions by retirement income product providers . But the complexity of the products and their sometimes inconsistent availability ( and pricing ) are barriers to more consistent use in planning — and adoption by more advisors .
To achieve its true potential , “ wellness ” must be integral to the language and the systems and the solutions of a firm . I will never forget the call from a seasoned advisor who had completed his outreach to a wealthy family , with the help of the head of household . “ I now have nine clients instead of one !” He was only partially kidding . It ’ s a lot of work to track the needs of families , and you don ’ t want to be the advisor who missed a Medicare election , a life event or the 21st birthday of a beneficiary .
The solution is a combination of systems for client data , simple technology tools for the clients that can be used along with the advisor ’ s old school training and coaching . The advisors and clients both will have to adopt the technologies to ensure the reach and consistency of engagement . And creating systems like this is the No . 1 job
34 | FINANCIAL ADVISOR MAGAZINE | JUNE 2024 WWW . FA-MAG . COM