A Word To Advisors: Focus On What Made You Successful

For advisors “flirting” with the idea of adding younger people to their client mix, one consultant has a word of warning: Don’t get sucked in!

There’s way too much at stake with retired and preretired clients to drop them in favor of a younger, more fickle crowd. That’s the word from Howard Schneider, president of Practical Perspectives, in a report out this month.

“Don’t lose sight about those clients,” Schneider said. “Most advisors still understand that retirement clients are critical to their practices. There’s just this pull for many to say, who’s next?”

Schneider said his survey of 850 advisors revealed an “insatiable” appetite for information around Social Security and claiming strategies. These strategies, when properly executed, can boost income by double-digit percentages for married filers.

The file-and-suspend claiming Social Security strategy will come to an end May 1, 2016, under the bipartisan budget bill signed into law last week. This gives advisors six months to implement the strategy for eligible clients.

That makes Social Security an even hotter area of interest for advisors, and yet the entitlement program does present as a quandary for advisors.

Since the Social Security Administration, not retail advisors, manages Social Security assets, it’s difficult if not impossible for advisors to charge a percentage of (Social Security) assets under management (AUM). This means that time spent by advisors on Social Security strategies, therefore, isn’t likely to be properly remunerated.

But advisors who leave out Social Security ignore it at their clients’ peril and run the risk of doing a big disservice to clients. Meanwhile, advisors who painstakingly map out an optimal withdrawal strategy aren’t likely to be compensated properly.

Social Security isn’t static, it’s dynamic, Schneider said. This is why his research consistently indicates that advisors want a lot of support around retirement and Social Security, from tools to illustrations to planning software or regulator-approved materials.

Now, back to that issue of getting sucked in and resisting the urge of the new, the young and the savvy.

With all the talk about aging advisors and aging clients, not a week goes by without tips and tricks for attracting technology-savvy millennials through social media channels, mobile hardware channels or retooled products, services and price points aimed at people born after 1980.

At times, it even seems as if younger prospects are the only ones who matter as markets obsess over what’s new and trending.

Yet it’s the retirement clients who represent a disproportionate share of the client base for the majority of retail advisors.

Schneider said that 73 percent of advisors told him retirement investors represent more than half the clients they work with. More than 90 percent of advisors expect the number of retirement clients they serve will continue to rise during the next year.

The findings are published in Schneider’s 108-page research paper titled “Advisors Working with Retirement-Oriented Clients — Insights and Opportunities 2015,” published this week.

Is there an ideal mix of retirement clients and younger millennials that advisors should aim for in their practices?

That depends, Schneider said.

A 58-year-old advisor planning to work for another 10 years may be comfortable with their client base and see no need to prospect further. Instead, the advisor may prefer to “ride it out” as many of their peers coast into retirement along with their clients.

But a 40-year-old advisor who intends to stay in the business for 20 years or more may want a broader client mix to replace older clients who “wind down” their lives and their assets and move into post-retirement years.

“It depends on the type of practice you have,” Schneider said. “If you are serving older retirement clients — retired or transitioning into retirement - it typically requires more work than those clients who are five or 10 years off from retirement,” he said.

“The point I’m making is don’t lose sight of what you have,” he said. “Keep focused on what’s made you successful is part of the message here. Don’t prioritize the next generation over serving who you already have as clients.”

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].