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The Practice Doctor is IN
Retirement Planning: How Deep Do You Go? Part III
In this final installment of our relationship-based retirement planning overview, we’ll take a look at your discovery (fact/feeling finding) process. There are three sections to an effective discovery: (1) assets and liabilities; (2) insurance; and (3) relationships.
Assets and Liabilities
The following is a list of the most common assets and liabilities needed to provide an accurate projection of your clients’ resources in retirement:
Insurance
The following is a list of the insurance policies your clients may have to manage their risk and protect their assets in retirement:
Relationships
The following is a list of people who could possibly play an important role in your clients’ financial lives during their retirement years:
A best-practices advisor will explore most, if not all, of the above categories, using a structured fact-finding tool (as opposed to a yellow pad). During this process you’ll also be collecting all available documentation for copying or imaging. This could include such items as statements, benefit booklets, tax returns, wills, trusts, medical directives, agreements, and any annual Social Security summaries.
Remember that this degree of thoroughness is appropriate for your A-list clients. While it would be great to be able to offer such depth to all clients who are planning their retirement, B and C-level clients are less likely than A-level clients to be in complex situations, which mean their retirement planning can be more generic.
Once you’ve gathered all of this information, you need to crunch the numbers and put together your presentation, using the following best practices as a guide: 1. Assist your client in preparing a detailed budget for expected expenditures in the initial years of retirement (the first two or three years of retirement). This budget will be reviewed and revised annually.
2. Project income streams (cash flow) showing the effect these withdrawals will have on your client’s nest egg and its underlying assets over time.
3. Account for the effects of inflation, market risk, taxation, and life expectancy on the asset pool as a whole and on significant individual assets.
4. Plan for income-disruption contingencies:
5. Ensure assets earmarked for legacy purposes are protected with trusts or other legal instruments such as gifts to charity, family, or schools.
6. Include an executive summary, limit the number of charts and graphs (5 or fewer) and include plenty of backup material to be used only if requested or needed.
7. Design your retirement presentation and projections to be reviewed and adjusted on at least an annual basis.
8. Include end-of-life issues such as:
Much of what we covered in this article can be formatted for 80 percent of your top-tier clients. The 20 percent that fall into the really complex planning area can easily devour your time and energy. Families with major relationship issues and dysfunctional communication systems can throw a monkey-wrench into the best-laid best-practices of an advisor. Be sure you charge appropriate fees before agreeing to take on these cases.
Hopefully, you’ve been able to test your professional mettle against the retirement planning best practices in this three-part series. If you’d like a collected version of these articles, just drop me a line. I’ve also collected the recent referral best practices series written for Mitch’s newsletter. Again, send an e-mail to request a copy or click here to be directed to past issues of the newsletter.
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 |
Al Depman, CLU, ChFC, CMFC, BH
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