The Practice Doctor is IN

Al Depman, CLU, ChFC, CMFC, BH

Retirement Planning: How Deep Do You Go? Part II

In part two of our exploration of retirement planning best practices we’ll take a look at how thoroughly the client has been educated on the key concepts.  As we discussed last month, painting a realistic picture of the retirement years is the critical first step. Without this picture in place, any number-crunching will produce nothing more than a broad, ball-park estimate of little long term use. 

There will always be clients who choose to be oblivious, unrealistic and live in a day-to-day retirement fantasy world. For them, the risk of running out of money falls squarely on their shoulders.  As their advisor, you can design a program and counsel them, but it is up to your client to accept responsibility.  These are customers, not the relationship-based clients you want for the long term.

As relationship-based advisors (financial life planners), we care about our clients.   We want them to enter this next phase of life with eyes wide open and a flexible game plan.  We want them to make life-affirming decisions and be able to carry them out.  For example, if your client would like to go to Europe and tour the wine countries, they should feel comfortable calling you and asking, “What do we need to do to make this happen?”  They should feel comfortable asking you for advice before the event, not after the fact.

To help develop these proactive clients, it’s important to provide them with educational materials in the course of the retirement preparation process.  These can be colorful one-pagers, easy to comprehend and read.  There are many sources for such material including: 

• Wholesalers
• Kettley (now Advisys) Backroom Technician
• Morningstar/Ibbotson
• Broker/dealer web sites
• NRM.com

Here are some best-practices topics that ought to be shared and reviewed with your client in order to properly build a financial retirement chassis.  With all of these, focus in on the performance over the course of your client’s lifetime.  If they were born in 1950, there’s 58 years of experience to reflect upon.  What will the next 35 years bring?  Of course we don’t know, but we can hedge our bets:

• Historical trends in fixed and variable investment indexes. Large/Mid/Small Cap stocks, bonds, 30-year treasuries, and money markets should be part of the graph.

• Historical trends in the Consumer Price Index (the inflation rate).  This is a fun exercise, comparing and contrasting prices on goods and services over the years.

• Historical trends in taxation. Include federal and state income taxes, and address estate taxation.

• Review of the types of income your client will encounter in retirement.  These include taxable, tax-deferred and non-taxable monies.

• Review of government-sponsored health programs and Social Security. What is your client’s view on the long term viability of these programs?

• Review of longevity trends.  This should reinforce that “retirement” could be a long period of time and plotting an income to age 100 is a reasonable course of action.
  
• Review of health-care costs of aging Americans. What’s covered and what’s normally out-of-pocket for the most common ailments and emergencies?

Having a library of retirement reference materials is a plus. Some advisors send their clients a book, such as Mitch’s The New Retirementality, or forward links to interesting web sites or mainstream publication articles.  The “Wall Street Journal” occasionally publishes special sections devoted to retirement topics.

In exploring the depth and breadth of your retirement planning process, are you providing your clients with all the resources they need to make smart, informed, realistic decisions?   Keep the above educational opportunities in mind and you will make it so!

Next month, we’ll finish the retirement planning series with a look at your discovery technique: getting to all the facts and feelings needed to do a thorough job.

Until next month, the Doctor is OUT.

Al Depman , CLU, ChFC, CMFC, BH, a.k.a. “The Practice Doctor”, is mitchanthony.com’s Business Practice Consultant. He is the creator of “The Practice Management Assessment” tool and materials and has authored numerous articles in professional publications on practice management. Al combined his Liberal Arts studies with 10 years of management experience with McDonald’s Corporation to enter the financial services world 22 years ago. Since then, Al has evolved from an MDRT-level sales rep into a full-time consultant specializing in helping others engineer their business practices to the next level. Contact him at al@mitchanthony.com .

© 2008 Al Depman