In the world of financial advice, focusing on retirement planning has long been the most popular strategy. And the reasoning is quite straightforward. Just as bank robber Willie Sutton once explained why he robbed banks – “Because that’s where the money is” – working with retirees means working with clients who have already accumulated substantial assets, and working with them on the retirement transition in particular means an opportunity to engage a new client when there is “money in motion”. Except there’s just one problem: really specializing in working with retirees entails far more than just managing retirement rollovers!
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we delve into what it really takes to specialize in working with retirees, with expertise that spans far beyond just creating a diversified retirement portfolio.
In part, the challenge is simply that effectively managing a retirement portfolio, and the distributions that occur from it, is about more than just managing the investments themselves. Because retirement portfolios also have to face sequence of return risk – the possibility that even if the portfolio generates the desired long-term return, if it achieves that return with an unfavorable sequence, ongoing distributions could catastrophically deplete the portfolio before the good returns show up! As a result, the best strategy for retirement income isn’t necessarily the one that produces the best return.
But frankly, retirement income issues just scratch the surface of what it really means to specialize in retirement and retirees. There are also issues such as planning for the timing of Social Security benefits, retiree-specific tax planning, making Medicare and other health insurance decisions, health issues more generally, housing wealth and reverse mortgages, housing lifestyle choices and whether to “age in place” or utilize a Continuing Care Retirement Community, handling cognitive decline and the problems that come with it, and even the emotional issues associated with death, grieving, and losing loved ones. These are the issues that retirees face, and need help with – and this is the kind of expertise advisors need to truly differentiate themselves as being retirement experts!
Of course, this all raises the question of how you actually learn to be a true retirement specialist in the first place, and where to learn all of this other stuff? Fortunately, there are some retirement-specific designation programs, such as the Retirement Income Certified Professional (RICP) program from the American College, the Certified Retirement Counsel (CRC) program from InFre, and the Retirement Management Analyst (RMA) program from the Retirement Income Industry Association, as well as specialized training programs, and a growing number of specialized conferences, too. In fact, while there are probably too many “generalist” financial advisor conferences already, we may need even more specialized conferences in the future, to support the increased importance of specializing into a niche!
But the bottom line is that if you want to be a financial advisor who truly specializes in retirement planning and working with retirees, it is going to mean doing a lot more than just focusing on a client’s retirement portfolio. It’s going to mean developing a much deeper understanding of the strategies and issues that are unique to this specialization!