Most people would agree that the context of retirement has changed – but has retirement advice changed along with it? This was a key question at the Health & Wealth: Investing for Longevity forum that I recently participated in, sponsored by leading financial services firms and the Big Brothers Big Sisters of Massachusetts Bay.
The primary goal of traditional retirement planning has been to provide financial security in life after work. Consider this example: Dave, a construction manager for nearly 35-plus years, and Barbara, a stay-at-home mother, saved, sent their children to college and planned for a predictable retirement in upstate, New York.
Dave’s employer provided a defined benefits package, from which he and his wife could anticipate a steady income supplemented by social security and personal investments. Their children live nearby and are available not just to visit, but to help their parents whenever necessary. An occasional vacation and time with the grandchildren are the reward for decades of work.
Dave and Barbara are living out the classical ideal of retirement—predictable, linear, and filled with leisure. But they are becoming the exception rather than the rule. Today, the entire context of retirement is different. Life itself has gotten longer. The fastest-growing portion of the population is people 85 and older. Retirement is no longer a few short years punctuated by trips to Disney and beach walks. For many, it is an entirely new life stage, one that encompasses one-third of adult life.
These additional decades of life bring added complexity with them. People are now looking at retirement not as an endpoint but as a series of transitions. For some, “retirement” is merely leaving one career to take another job, to start a new business, or to volunteer.
Income in retirement is not nearly as predictable as it was for Dave and Barbara. The transition of most employers from defined benefit to defined contribution programs demands that employees be far more aware and active in the management of their retirement investments.
Family dynamics have made retirement more complex. Children have always been the real social security to age well. But the Baby Boomers and Generation X had fewer children than their parents. Moreover, their children are likely to be part of a dual-income household with limited time to care for parents. Unlike in Dave and Barbara’s retirement life, many Baby Boomers’ adult children have found jobs and started lives far away from their parents, making it difficult for them to help out or provide care.
What’s more, couples that have spent decades together may call it quits in retirement. As I wrote in a previous article, gray divorce—splitting up after age 50—transforms what was to be a life stage of leisure into a time of tumultuous transition.
To retire well, money is critical, but not fully sufficient. Given the changing context of retirement, retirement advice must move beyond mere financial planning to longevity preparedness. With longer lives, changing family dynamics, and entirely new ideas of what older age is, today’s retirement (or longevity) client has new expectations and needs. More than a financial advisor, today’s client is seeking a navigator to provide information to actively anticipate what is likely to come in older age, give recommendations and access to services to adapt to those transitions and, of course, effectively plan and invest to ensure adequate financial resources.
Do clients need an advisor or an advisory team? Research conducted by my colleagues at the MIT AgeLab suggests that the complexity of tomorrow’s retirement makes any single source of expertise inadequate to address the unprecedented challenges that will be faced by the next-generation retiree. Rather, valued advice is likely to come in the form of what I would call a longevity advisory team.
In a longevity advisory team, a single advisor owns the relationship with a client and her family. Clients typically want at least one person that they know well, understands them and ultimately can be held accountable. However, clients also see greater value in an advisor who is a gateway to an advisory team that can provide access to a diversity of expertise and services to address the new complexities of longevity itself.
Advisory teams are not entirely new. Countless advisors have accountants, lawyers, and real estate agents on speed-dial, some even on staff. However, the new longevity advisory team will include more—much more.
Dave and Barbara have children to help them with everything from home maintenance to home care, but not everyone will. Tomorrow’s longevity advisory team will provide clients with access to trusted home services, home modification contractors, home care aides and more—not just at the time of need, but as part of educating a client family and creating a longevity plan that anticipates future life transitions as well as their costs.
As the science fiction writer William Gibson observed, the future is already here – it’s just not very evenly distributed. Chuck Bean of Massachusetts-based Heritage Financial Services explains, “We’re expanding beyond traditional wealth management services to include client concierge offerings. We have a relationship with Prime Motor Group for preferred pricing on auto purchases and are considering relationships with P&C insurance carriers and travel agencies for discounts.”
CIBC Wood Gundy’s Maili Wong in Vancouver, Canada goes beyond financial security alone to include discussions that consider both the quality and quantity of life in retirement. Wong notes that this “means helping them (clients) find new joy from a positive living environment and meaningful relationships – a revolutionary way to live in retirement.”
Raymond James is now offering longevity planning resources to its advisors that include health care concierge firms, transportation service providers, and other sources of both expertise and services that are essential for modern living in retirement.
These practice innovations go well beyond simply meeting a client need; they make good advisory business. While money may not be the first thing that comes to mind when we think about providing care to a loved one, more than 90% of caregivers say they are also financial caregivers, according to a report on Caregiving from Merrill Lynch. Surya Kolluri, Managing Director at Merrill Lynch, believes that they have identified a big and growing need. He says “Advisors who engage clients on life events and stages find their practices transformed by establishing deeper connections with their clients and their families.”
These innovations are the beginnings of an evolving comprehensive longevity advisory business model. Linking clients to resources and conversations are a start. As clients and financial services firms discover the new needs and opportunities of living longer in today’s longevity economy, we will see the business of advice transform into an entirely new industry of longevity preparedness and solutions, as well as a new model of advisory practice dramatically increasing the perceived value of advice by clients.