Recession Scars Still Impacting Advisors

Nearly 10 years after the financial crisis, middle-income baby boomers still feel the sting of losing trillions of dollars in asset values.

Many middle-income boomers have responded by adjusting their financial behavior, such as taking a more defensive investment stance. However, few have turned to a financial advisor for help.

Only 8 percent of boomers said they were working with an advisor since the financial crisis. Only 10 percent said they sought additional financial education since the 2008 meltdown. That's according to a recent Bankers Life survey.

“I talk to people who talk about the Great Recession as if it happened last week,” said Krzysztof Garlewicz, a financial planner in Rosemont, Ill.

Too many middle-income boomers can be characterized as having their heads buried in the sand, said Scott Goldberg, president of Bankers Life.

Boomers seem to be playing defense. They’ve retrenched, they’ve invested little in reaching out to a financial coach. They’ve “parked the bus,” an expression to disparage soccer teams playing for a tie instead of following a plan and playing to win.

Advisors don’t blame boomer investors.

Investors have lived through the run up to the dot-com bubble in the late 1990s before the technology collapse, only to see the explosion in housing prices lead to the spectacular 2008 crash. Now, again, the market crash has just marked its eighth anniversary.

The trauma of 2008 has even been blamed for the economic nationalism espoused by senior White House advisor Stephen K. Bannon, 63. Bannon's 95-year-old father saw his nest egg of AT&T stock almost wiped out in the Great Recession.

“It seems that the scars of the Great Recession are still vivid for many boomers,” said financial planner Chris Chen in Waltham, Mass.

They are, but what can advisors do to heal the festering financial wounds?

Bury the Cliché

For one, financial advisors need to communicate that quality financial advice is easily available to middle-income families who earn between $30,000 and $100,000 annually and who have less than $1 million in investable assets.

“Many (boomers) seem to assume that you need to be high net worth to have access to or be able to afford an advisor,” said Jon Powell, a financial planner for Ferguson-Johnson Wealth Management in Rockville, Md.

It’s a false image, fueled by TV ads for investment advice portraying people as successful, emerging from expensive sports cars and disappearing into sleek buildings, he said.

In fact, many financial advisors are willing to work with families owning as little as $20,000 in retirement assets, according to industry experts and financial advisory trade organizations.

There was some good news in the Bankers Life Center for a Secure Retirement survey of 1,000 middle-income Americans ages 52 to 70.

The study found that 74 percent of middle-income boomers have taken at least one step to adjust their investing behavior since the crisis.

Those steps included taking a more conservative tack, reviewing allocations, seeking additional financial education and investing in products offering principal protection such as annuities.

Still, 26 percent said they no longer invest, the study found.

If that seems like a high percentage, it is. It's especially true as middle-income boomers who use an advisor typically report higher confidence levels when it comes to investing for the long term and retirement.

Connect, Communicate and Illustrate

Garlewicz said there is nothing more effective than educating boomers about the four levers which they can control: income, expenses, savings and emotion.

Connecting emotionally with clients offers perhaps the most powerful lever of all over a boomer client, he said.

“Focus further on who you are trying to serve and develop the relationship through education to develop emotional connections.”

Many prospects – but not all – come around when advisors communicate, illustrate and explain a sound investment plan and why clients are invested as they are. This is important so that clients don't panic when moments of uncertainty overtake the markets, said Powell of Ferguson-Johnson.

The Brexit vote last June was one such moment, but since fears had been “preaddressed” in the investment plan, clients generally took the news in stride, he added.

Most of Ferguson-Johnson's clients are generated through referrals, so there’s already a prescreening of prospects that takes place, he said.

Some prospects simply will have a different approach to investing and aren’t likely to be a good fit for the advisory firm.

In that case, it’s best to part ways after the third or fourth meeting before any serious advice or money changes hands, Powell said.

Target Client Groups

Retail advisors suffer from a “buckshot” approach to clients. So advisors should think about specializing in serving a niche clientele - for example, baby boomer medical professionals preparing for retirement, Garlewicz said.

That could mean some pruning some clients from the roster, which is painful.

In the long run, bidding goodbye to clients will make for a better, stronger advisor-client relationship with those who remain, he said.

Clients on the roster will refer new clients facing the same financial challenges and predicaments, Garlewicz said.

“Embrace becoming a specialist."

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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