| p>The "Fantasyland" I refer to here is the financial | | | | succeeded in this area, you are doing yourself |
| industry's typical approach to retirement income. It's an | | | | irreparable damage. You can't easily learn this on your |
| ancient myth or a hallucination. Here's why: | | | | own and why would you want to try? |
| Nearly every person with any kind of financial and/or | | | | 5. If you do not already use financial models based on |
| insurance credential has been taught to look at the | | | | delivering powerful and effective solutions to seniors |
| world through product-colored glasses. In Fantasyland, | | | | and/or retirees, you are likely doing yourself and their |
| no matter what the client wants, the industry equates it | | | | families irreparable damage. This is a glimpse into |
| to a product purchase. Between the securities, the life | | | | Ethics Land. |
| insurance, LTC, the annuities, every American has | | | | What does your target market see in you? |
| been tagged with pre-purchase probabilities and added | | | | I love this experiment. Just for a minute, put yourself in |
| to the calculation of "share of wallet." | | | | the mind's eye of your target market. Become one of |
| What's wrong with that? | | | | them. Look at the wide variety of choices offered to |
| After all, it's the products that allow us to solve retiree | | | | them. Do they really trust that you understand them |
| problems, right? It's the products that generate our | | | | and can make good decisions for them with insight |
| incomes, right? While those arguments are basically | | | | and forethought? More importantly, do you know how |
| true, there are two things wrong - and they're big ones: | | | | to make your decisions based on their best interest |
| 1) they fail to consider the client. 2) products by | | | | and not your own personal gain? |
| themselves could only provide a solution for an | | | | Every time I guide someone through this experiment, I |
| overly-simplistic life. There are way too many | | | | see their eyes pop open as though it is the first time |
| complications and issues at play in any retiree's life | | | | for that person to see the financial world through the |
| today. | | | | eyes of his/her own clients. They immediately realize |
| Look at a client, his/her life, lifestyle, and future activities | | | | that their clients see a financial world cluttered with too |
| - in all its glorious complexity. In the olden days, simplistic | | | | many choices, too many products, too many |
| was the "law of the land." Dad would work for 20 | | | | companies, too many sales pitches, too many channels |
| years and retire to the front porch rocking chair. His | | | | of confusion and too many advisors whose goal is to |
| only financial need was some life insurance and a | | | | make money, rather than take care of their clients. |
| couple of stocks. Know anyone who fits that model | | | | Beep! The brain shuts down. |
| these days? I seriously doubt it. | | | | Remember, your clients don't want a company. They |
| Today, the "law of the land" has dad retiring early and | | | | don't want a product. They only want real solutions to |
| rolling a 401(k). He owns a life policy, has some mutual | | | | their financial problems. But what do they get from the |
| funds, ETFs and he probably trades stocks on | | | | financial industry? |
| E-Trade. What's wrong with that combination? Nothing, | | | | The Ancient Legend. There is an ancient legend of an |
| if he lives in Never Never Land and is going to remain | | | | elephant and six financial advisors with 20/20 vision. |
| that same age forever, as though he were Peter Pan. | | | | Each was asked to stand in the elephant's room and |
| With that profile in mind, you and I both know that Dad | | | | then describe what he saw. The first claimed to see |
| is getting older and his actual needs are going to | | | | nothing. The second said he saw his firm's logo color. |
| change. But because this is Fantasyland, his financial | | | | The third recognized the elephant from |
| advisor is going to keep bringing him products to | | | | advertisements. The fourth said he didn't believe in |
| purchase, keep him in the market and keep him | | | | elephants. The fifth claimed that elephants and the |
| working toward greater accumulation. His insurance | | | | people who associate with them were unimportant. |
| agent is going to urge him to move his money from | | | | And the sixth demanded to be paid for his time before |
| equities into a fixed annuity. Then around April 15, his | | | | answering any question. |
| CPA is going to throw a fit about his tax exposure. | | | | That ancient legend illustrates something that is vital to |
| What's wrong with that? | | | | retirees and seniors. The elephant represents an |
| Everything. There is no cohesion, no coordination and | | | | enormous amount of wealth that has been |
| no logic. Like Dr. Doolittle's Push me-Pull you, Dad is | | | | accumulated and is still being added to. It is the |
| being pulled apart by competing pitches and proposals. | | | | collective assets of retirees and seniors - people 60 |
| But at least his valued advisors will be earning | | | | and better. The six advisors represent the prevailing |
| commissions. | | | | attitudes of today's financial advisors: denial, company |
| Conjure the image of the typical "primo" client - one | | | | loyalty, ignorance, misinformation, marketing, ego and |
| with assets. Naturally, you want to be the advisor of | | | | the profit motive. We call them the "Six deadly sinners." |
| record, the only financial person giving advice, right? | | | | Who's in Charge? |
| The odds are against it. The fact is most people with | | | | The financial industry has been stuck in a behavior loop |
| assets have more than one advisor. According to US | | | | for decades. The call to action has been: Accumulate! |
| Banker, the typical millionaire has 14 financial services | | | | Accumulate! Stack that money up! The trophies the |
| relationships and seven advisors. Other sources report | | | | industry loves to hang on every inch of wall space |
| similar numbers. Why is that? Let's see: | | | | have been based on amassing wealth - the clients' |
| - 94% of "highly satisfied" clients are likely to make | | | | wealth. The millions are like notches in the pistol grips of |
| referrals | | | | hired guns. It's as though the client's money becomes |
| - 86% of "highly satisfied" clients are likely to buy | | | | the advisor's money. After all, it's the advisor's goal to |
| additional products and services | | | | get ever more money under management, right? |
| - Zero (0%) of "highly satisfied" are likely to leave | | | | While that strategy may have once made sense, |
| - Most clients are concerned about losing their wealth | | | | simply because there were enough investors at an |
| but very few advisors recognize it | | | | age where a focus on accumulation made sense, it's |
| Stats from Cultivating the Middle Class Millionaire by | | | | not true today, and it becomes less true with each |
| David A. Geracioti and Russ Alan Prince | | | | volatile day that goes by. Let's look at some facts: |
| There are two points here: 1) If those numbers don't | | | | 1. The leading edge of Baby Boomers turned 60 in |
| represent your experience, your clients may not be as | | | | 2006. |
| thrilled with your service as you are. 2) Individuals with | | | | 2. This year, 8500 Boomers turn 60 every day. |
| assets tend to have multiple advisors giving them | | | | 3. By 2010, there will be 10,000 Boomers turning 60 |
| different advice. | | | | every day. |
| If you were my client and had multiple other advisors, | | | | 4. When people turn 60, they begin to shift their focus |
| wouldn't you be comparing service levels and results? | | | | from accumulation to distribution. |
| You'd probably make a spreadsheet for comparisons, | | | | What do those facts add up to? |
| just like the employee benefits people do. Bottom line | | | | Something oh so simple, and appar¬ently oh so |
| is, you would be comparing quality and looking to learn | | | | invisible as that giant elephant munching in the room. |
| who was consistently giving you the best quality. So, | | | | The point is simple: Combine the growing Boomer |
| what do clients think about the quality provided by their | | | | demographic with the already strong 60-80 year old |
| advisors? It's not a pretty picture. | | | | contingent and you start to get a clear picture. It's a |
| According to Prince and Associates: | | | | picture of an industry that is refusing to accept the |
| - 71% of middle-class millionaires say they plan to take | | | | truth in the facts. An industry that is failing its older |
| money away from their primary advisor | | | | clients. An industry that has an obsessive compulsive |
| - 65% plan to terminate their advisor and find another | | | | disorder - it can't stop focusing on accumulation. |
| one | | | | So what? The market is changing faster than the |
| - 66% said they would tell other people to avoid their | | | | mindsets of the financial advisors who serve the |
| advisor | | | | market and the CPA/accountant who is hesitant to |
| * Stats from Prince and Associates research | | | | advise. While distribution is "where it's at," most |
| referenced in Clients Ticked Off at Their Advisors, | | | | advisors are mentally, emotion¬ally and professionally |
| Financial Advisor Magazine, May 2008 | | | | unprepared to serve their clients' distribution needs. |
| While Prince and Associates found those numbers | | | | - Distribution represents a totally different mind set - |
| relevant to middle-class millionaires, our experience is | | | | money goes out instead of coming in. |
| that they are consistent across all strata of people | | | | - Distribution requires a totally different product |
| with investable assets and that means a high | | | | mastery - more fixed products and fewer equities. |
| percentage of people either retired or approaching | | | | Traditional Advisors miss the mark |
| retirement. | | | | Picture an 80-year-old man. What is the logic of placing |
| The Best Advice? | | | | that person's financial security at risk in equities? Zero? |
| What do you think the best advice is? We know | | | | Perhaps. |
| advisors who put all their clients into a mix of mutual | | | | But in the years between 60 and 80, shouldn't there be |
| funds and call that diversification. We know other | | | | a financial strategy that combines fixed vehicles and |
| advisors who put all their clients into annuities and CDs. | | | | equities on a sliding scale, shifting more focus to the |
| What do you think is the best advice for people about | | | | fixed side with each year? |
| to retire? | | | | Bottom line - it seems to go against the nature of the |
| Logic. | | | | typical financial advisor to help a client amass savings |
| People moving into and then through retirement have | | | | only to then take that money out of circulation or have |
| less and less need to accumulate. Doesn't the risk | | | | those dollars taken over by another person or entity - |
| outweigh the possible gain? However, the flip side is | | | | one who specializes in seniors. Not only are the typical |
| just as off target. Staying out of the market gives you | | | | advisors losing the asset to someone else, they are |
| a bucket with a bunch of holes shot through it. The | | | | losing the ability to control the account. They're losing |
| solution for just about anyone moving through | | | | their ability create further savings. Through the eyes of |
| retirement is somewhere between high market thrill | | | | the typical advisor, there is little incentive to focus on |
| seeking and reactively paranoid. What's more, it's a | | | | distribution. To them, there is no business case for it. |
| moving target because as we age, our financial needs | | | | To them, their clients have become their own annuity |
| and risk tolerance change. | | | | and it's insane to give it away. |
| In front of us is a scenario that's not often mentioned in | | | | Truth is, society has changed - it got older. Truth is, |
| polite financial company. As an industry, we don't want | | | | annuities have changed, too. Newer products provide |
| to admit that we don't have all the answers. We don't | | | | both flexibility and incentive to the two people most |
| want to admit that our advice is not the best for our | | | | important in your client's lives - you and him. The new |
| clients. But as our clients turn the corner on 60 and | | | | generation of annuities provides you (the advisor/cpa |
| stumble into retirement, our training and product | | | | accountant) with greater control and increased tax |
| selection is very likely to be off-target and inadequate | | | | advantages. For example, you can maintain money in |
| for them. With that in mind, let's take a step into | | | | the market and control investment selection. |
| something better. Now we move from Fantasyland | | | | It seems the only people who haven't changed are the |
| and take a stroll into Frontierland. | | | | Advisors. Could it be the giant gray peanut eater in the |
| Welcome to Frontierland! | | | | room is the typical advisor? Could it be the business |
| Any reasonable plan to distribute income to a retired | | | | model of the industry's hired guns needs to go the |
| person has to include at least these four elements: | | | | way of prohibition, segregation and sub-prime loans? |
| Social Security, Retirement Account(s), Personal | | | | What Does This Mean to You? |
| savings and the client's lifestyle. What's missing? | | | | The advisor, the CPA, the accountant or the insurance |
| The Missing Element - You, the Advisor, CPA, or | | | | agent who does not yet know how to manage the |
| Accountant | | | | spinning plates of products, plus the client's lifestyle, |
| Here is how you and your training and abilities can | | | | goals and personal strategies will cause many of |
| affect the life of someone in or near retirement: | | | | those plates to drop. That's you spinning those plates. |
| 1. If you are not thinking about the client first, you could | | | | And with every plate that drops, a family gets socked |
| do some irreparable damage. Many retired people | | | | in the jaw. Do you want that on your head? Or would |
| simply don't have enough years left to wait for the | | | | you rather make every effort to provide the most |
| market to rebuild losses. | | | | effective solutions to your clients, no matter what the |
| 2. If you do not yet have the expertise to combine | | | | commission or payout is? It's your decision to make. |
| social security, retirement account(s) and savings - to | | | | As unprecedented numbers of Americans turn 60 |
| create the exact type of retirement income that | | | | everyday, what seniors need and want, more than |
| individual client wants, you could do even more | | | | ever, is sound advice from a sound mind, a true |
| irreparable damage. In fact, if you don't have that | | | | trusted advisor. With more 85 year olds than |
| expertise, you're probably doing more harm than good. | | | | teenagers walking the streets, the aging of the |
| 3. If you do not know how to build a thriving business | | | | population is the most underserved demographic in |
| around this type of distribution, you are doing yourself | | | | America. He/she who takes the active and |
| (and your clients) some irreparable damage. Then, if | | | | appropriate steps to position him/herself in front of the |
| you go out of business, you hurt them again. Doesn't it | | | | aging of America stands to capitalize on this |
| make sense to learn how to build a thriving business, | | | | demographic through appropriate strategies and |
| rather than focus on selling products? | | | | mechanisms. |
| 4. If you do not have a mentor who has already | | | | |