How well do you really know your clients who are approaching or in retirement? Are they comfortable in their current homes? What’s their game plan should they need long-term care? Do they plan to launch an encore career or new business? What are their health concerns and legacy goals? Are they fretting about the financial security of their children or grandchildren?
The answers are critical to clients’ financial health and overall well-being, yet the conversations aren’t always as frequent or as robust as they should be. Longevity planning is also essential to building and sustaining client-advisor relationships, advisors and researchers have found.
“For advisors that are doing well, it’s not a matter of if they choose to have discussions around longevity planning … it’s a matter of when. This is where the business is going,” says Joseph Coughlin, director of the Massachusetts Institute of Technology AgeLab, which conducts a lot of research on retirement and longevity planning.
The MIT AgeLab evaluated the willingness of clients and advisors to explore longevity-related topics in its client-focused study “The Future of Client-Advisor Relationships,” conducted with AIG Life & Retirement, and a separate study of advisors. We’ll share some of the findings in a bit [Coughlin and his colleagues wrote about the studies in the Journal of Financial Planning in December.]
Rethinking65 caught up with Coughlin and several advisors who’ve been actively integrating longevity planning into their practices, large and small. We wanted to learn more about why they think it’s so important — and how advisors can offer longevity planning amid time constraints, limited expertise in some areas and client hesitation.
Clients no longer find great value in the fact that their advisors save them money or make them money, says Coughlin. Today that’s “baked in” and expected, he says, in the same way that no one is “going to the grocery store and being shocked that there’s zucchini on the shelf.”
Instead, “The real value proposition now for a new generation of pre-retirees and recent retirees is, ‘Gee, how do I navigate this longer life that is far different than my parents before me?’” he says. “And so that’s where advisors need to come up with new skills and new content and new conversations in order to provide that value.”
Financial advisor Andy Panko, CFP, RICP, owner and founder of Tenon Financial, LLC in New Jersey, agrees. “Managing investments is increasingly commoditized; that’s not the value, the value is this other stuff,” he says. Longevity planning “can mean where do I live; it can mean what happens if I have some form of dementia; it can mean what happens if I have a physical long-term-care event.”
A Panoramic View
Michael Nathanson, chair and CEO of The Colony Group, a national independent wealth and business management firm managing $19 billion in assets, also reflects on the changing industry landscape.
“The advisor of 30 years ago approached longevity planning primarily through a single lens — investment planning. During the past 30 years, a select subset of advisors broadened their perspective by adding a second lens — financial planning. Today’s ‘ideal’ advisor must have a panoramic view of longevity planning,” he says, and “even that metaphor fails unless the panoramic view is multidimensional.”
Today’s advisors “can offer services that transcend traditional investment and financial planning and include planning around fulfilment, happiness, health, family, community, and even legacy — meaning they can plan beyond longevity,” says Nathanson.
And if advisors overlook longevity planning? “The risks for advisors who don’t, won’t or can’t expand their services and expertise can include failing to achieve their missions and visions, losing clients and employees to more forward-thinking competitors, and potentially suffering the fate of all organisms that fail to adapt to a changing environment — extinction,” says Nathanson.
“But the risks for clients are far more profound,” he says. “Even if they have sufficient assets to accommodate their longevity, they may not get to enjoy them, share them, and leverage them to live the rich and meaningful lives they seek.”
Cathy Seeber, CFT, CeFT, a financial advisor with CAPTRUST, says all longevity planning — whether it’s related to downsizing, long-term care, dementia or something else — has financial implications for clients. And “when they’re vulnerable like that, the decisions are most likely irrevocable,” she says, which means they really need a trusted source.
“If you’re are not that person, they’re going to get advice from someone else. And it’s not necessarily going to be in their best interests,” she says. “It’s going to be the brother-in-law who thinks he knows more than the advisor does. And then you’re going to lose the next generation.”
Seeber recalls a case study in a class at the Sudden Money Institute [where she earned her Certified Financial Transitionist credential] about a widow pressured by her family to downsize to a brand-new, high-rise condo in the city. That’s what her family wanted, to make it easiest for them, “but she was miserable, absolutely positively miserable,” says Seeber.
The woman then hired a transition specialist who asked what makes her happy — a question no one else had asked her. Turns out she like to garden and wanted to walk to church. She found a bungalow with a yard, that she hired someone to maintain, but she lost a lot of money because she had to move twice, says Seeber.
Research Supports Broader Conversations
Advisors we’ve interviewed over the years have told us about clients who failed to inform them about major life events because they didn’t think they were relevant to their finances. Health issues/long-term care and adult children needing financial support are the biggies. Some clients are also very private. But these findings from the MIT AgeLab studies may encourage you to more proactively initiate client conversations that go beyond traditional financial topics:
- Roughly 95% of respondents whose financial professional have spoken with them about their current housing situation, physical health, potential care expenses and fraud prevention/identity protection said they want to talk about these topics again or would be willing to if they come up again. But among respondents who had never had such conversations with their financial professionals, a much greater percentage said they don’t want to discuss these topics.
- According to the study, 20% to 25% of respondents age 61 to 75 (the oldest demographic surveyed) and age 46 to 60 see “managing complex aspects of my life,” beyond finances, as a role for the ideal financial professional. [This compares with nearly 80% of the advisors surveyed].
- But the top driver of advisor satisfaction, said the majority of respondents age 61 to 75 (60%) and 46 to 60 (56%), is having a financial professional who understands their financial and life goals. So, ignoring longevity-planning issues, especially considering that clients could potentially spend upward of 30 years in retirement, seems very shortsighted.
Here’s something else to consider: Even if clients appear to believe the ideal adviser should be more involved in their lives, they may still have difficulty envisioning which roles or aspects of their lives may be pertinent to discuss with their advisor, said the MIT AgeLab researchers.
Being Relatable and Responsible
Panko tries to spare his clients the difficulty and awkwardness of knowing what issues they can ask him about. “What I tell clients is, ‘Any important decision in your life, especially anything that has financial implications, run it by me, that’s what I’m here for,’’ he says. “I try to be their sort of sounding board as much as possible.”
Panko helped a widowed client in her mid 60s analyze the pros and cons of multiple job offers when, after several years in retirement, she decided to return to work mostly for the social interaction. “I’m not a career counselor by any means,” he says, but he realized his client trusted him. “It was a tremendously fruitful and very impactful conversation.”
Does the ideal advisor need to be able to tackle all aspects of longevity planning, including long-term care, health, housing and home modifications, job transitions and late-life entrepreneurships, and helping clients support their family members?
“Ideally, yes, in a perfect world. I don’t know any client that wouldn’t appreciate an advisor providing guidance,” says Panko. “But practically, you can’t be all these things to all people, especially if you’re a small shop.”
He runs a solo practice that’s small by design — 40 to 50 relationships — which he says gives him plenty of time to get to know his clients. “I didn’t intentionally set out to build a practice where I do offer things like that, but I’m glad I did. I think there’s tremendous value-add with stuff like that as it comes up.” He doesn’t charge extra for these longevity-planning services.
“I try to read and soak up as much as I can,” says Panko, regarding longevity planning matters. However, he is careful not to overstep his boundaries. “If it’s something I have no business talking about, as a fiduciary you have to draw the line when you know you can’t help and you’re not in the best position to help.”
The Financial Planning Association, the XY Planning Network and a few other advisory groups he belongs to offer “a tremendous network of people and expertise and brainpower, so I frequently go there when I want or need a referral,” he says. He’s found a handful of long-term care specialists he likes, has learned a lot from, and refers clients to when they need it, he says.
An Aging Plan for “Long Life Planning”
“Most advisors shy away from even talking about doing longevity planning because it’s not a check-the-box area of comprehensive planning,” says Seeber. Reaching out to an accountant and estate planning attorney is more standard, but finding the right contacts for longevity planning “is so convoluted because it’s based solely on that person’s individual situation.”
Advisors may also be worried they don’t know enough about longevity issues. But just like with a CPA or estate planning attorney, “you need to be the conduit to help. You aren’t supposed to be the expert,” she says.
Seeber, who is based in Delaware, has developed a list of local resources she works with on clients’ aging plans. Included are a geriatric social worker, a daily money manager, a senior care advocate, a CPA specializing in seniors’ more high-touch needs, funeral homes for client who preplan, home organizers, realtors, an aging-in-place specialist, homecare and hospice workers, a Medicare specialist and a family support attorney who can serve as a trusted guardian.
She taps into CAPTRUST’s list of resources if she needs a referral for a client in another state.
Seeber prefers to refer to longevity planning as long-life planning. “Long life is much more opportunistic than longevity, which sounds like you get to a certain point and for eight years you’re just a vegetable,” she says.
Like other advisors, she has found it can be difficult to get clients to open up about their long-life planning needs. A new client recently told her he probably wouldn’t be interested in taking some steps she initially suggested. So, she led off with a technology topic and then inquired about his daughter while noting that she’s a 50% beneficiary. The client then started opening up about his life and wondered aloud if he would be able to rely on his daughter to care for him in his old age.
“It was so innocent, and he didn’t know that we were going down that path,” says Seeber. “And it was so funny — at the end of the conversation, he was like, ‘Wow! I really talked!’”
Seeber doesn’t charge clients for time she spends helping them with longevity-planning matters. Instead, she asks them to forward her name to people they know who are dealing with similar issues. “It’s paid off in spades,” she says.
A Team Effort
Nathanson says he finds that when clients are reluctant to expand conversations beyond financial matters, it may help to involve their children or other next-generation family members.
“Younger generations are of course also focused on financial matters but sometimes have more forceful opinions on the difference between financial enrichment and life enrichment,” he says. “And older generations may find it more compelling to explore expansive services and ideas when they see themselves doing so not only for their own benefit but also for the benefit of their families and communities.”
The Colony Group’s Curated by Colony platform, launched in 2020, offers clients access to third-party service providers in health and wellbeing, educational and second-career consulting, travel and entertainment, and security. Rethinking65 asked Nathanson what initial steps he suggests for firms that may be considering creating some sort of concierge services to address these non-financial needs.
“Start by asking open-ended questions to clients about what they really want and need,” he says. “Surveys are an efficient way to do this, but honest, direct conversations are almost always most effective.” It’s also important to ask colleagues who regularly speak with clients what they’re hearing and to ask around the industry, he says.
“It can be scary to hear that clients want something you can’t currently offer, but I believe the firms that are most successful in the future will be the ones that turn those fears into an opportunity, if not a mandate, to evolve,” he says.
“Advisors who limit their advice to account for their own limitations may do a disservice to their clients,” says Nathanson. “Some might say that, by making this argument, I myself am expressing a bias — for larger firms that have more global capabilities — but I don’t think so,” he adds. “Smaller firms that do not have broad internal capabilities can usually outsource them — if they can get beyond their own biases.”
More Talking Points
Coughlin, of the MIT AgeLab, says advisors may have more time to develop closer relationships with clients as more of the financial work, including portfolio construction, is moving even further into the back office.
To get clients to open up more about their longevity needs, he suggests telling them a bit about your own life-planning concerns. For example, “the fact that you’ve got kids that may not be doing as well as you had hoped, and you may have to start supporting them through your retirement,” he says, or “My mom is having more difficulty. I’m not sure how long she’s going to be able to stay in our house.”
Younger advisors who may not have that life experience can draw upon the experiences of clients, say Coughlin. “All your clients are a wealth of stories — you don’t use names but you use experiences,” he says. “Stories explain why we do certain things. They’re the power of education.”
Jerilyn Klein is editorial director of Rethinking65.