Insights

Mary and Ed

A HNW couple looking for both protection and tax efficiency in their relationship “do-over”

Whoever said you can’t go around twice in life hasn’t met Mary and Ed. 

Once young professionals embarking on their careers, the couple became invested in their jobs and drifted apart - eventually going their separate ways. Both married and Mary had a daughter - now an adult with her own family. 

Mary and Ed are successful professionals and both say they prioritized their careers at the expense of family and friends - and didn’t take much time to enjoy their financial success. Both also share openly that they regret their separate marriages ended in divorce. 

But the fates intervened a few years ago when a mutual friend reconnected the two and they soon rekindled their romance. Mary and Ed say they are lucky to give their relationship a “do over”. Mary says she’s keeping her prize possession - a vintage red Corvette and Ed is equally committed to his Harley, which he rides on weekends with a group in the Northern California hills. 

The couple not only drive differently on the road, they take separate routes with their money. Each has a financial advisor and though their investment styles are not the same they are complementary. “Just like our personalities!”, shares Ed. 

Mary invests for herself as well as her daughter, for whom she has a trust. As a result of her divorce - requiring her to pay alimony to her former husband - she is focused on protection and security. She has shared her approach with her daughter, who is also now well aware of the financial issues of relationships. Mary has invested via managed accounts for total return but has also emphasized protection strategies for premature death and disability. She is keenly focused on risk/reward. 

Ed likes to invest directly and has had success selecting individual investments - mostly stocks. He has been fairly aggressive in his retirement account with funds favoring growth over income. 

Though they are maintaining separate accounts and advisors, Mary and Ed are working together to plan their future. They have some new objectives that require some adjustments to their combined assets and investment strategies. They have taken input from their advisors and shared their plans with both professionals. 

The most important changes to their current investments have been to establish “safety nets” for the longer term risks they both face. While they have sufficient assets to ensure a healthy retirement paycheck - $5 million - they want to leverage their cash to more efficiently mitigate the risks associated with healthcare costs and longevity. 

Mary has been the more protective of the two thus far. She has been funding her daughter’s trust with life insurance. Mary’s advisor initially resisted Mary’s concerns about security in retirement and providing for income only from her portfolio, which he told her was adequate for her expected retirement duration. Mary’s best friend introduced Mary to her advisor, who recommended allocating some of Mary’s total return portfolio to be more “protective”. Specifically, she suggested increasing the level of protected income and adding guarantees for more protection against her premature death. In addition, she provided ideas for funding long-term care. Mary’s response, “I liked her focus on protection instead of just investing. It just seemed to me she is looking at a broader set of options for my investment dollars”. Mary moved most of her accounts to the new advisor. 

Ed has also prepared changes. Without any direct heirs, he had never engaged in estate planning and has now the draft of a plan benefiting Mary and his sister. As a result of Mary’s insights, he is also considering life insurance as well as long-term care. He heard about QLAC from a friend and had a subsequent conversation with Mary’s new advisor. While Mary has been especially interested in “protection”, Ed sees some of the protection strategies - like the QLAC - as part of improving his overall tax efficiency. Like many (most?) high-net-worth clients, Ed does not like taxes. 

Because he has long been a self-directed investor, Ed was never very close with his financial advisor. His advisor gave up providing ideas and even the potential for formal financial planning. Ed says he never wanted to take the time involved. His advisor recently retired (they were college pals) and Ed’s account has been transferred to a younger man Ed has not met. Mary jokes, “Why don’t we introduce your advisor to mine?” Mary’s advisor is a woman. 

Though they are not the same investor, Mary and Ed together fit the profile of “Ambitious Risk Takers” (ARTs) researched by the Alliance for Lifetime Income. ARTs are financially well off and are comfortable with investments. They understand the trade offs among investment strategies and are very conscious of inflation and taxes. 

Like many of their age contemporaries in the Boomer generation, Mary and Ed want to spend less time working and less time managing their money. They want to optimize their investments to pay reliable income, reduce taxes and offset unknown but potentially significant costs. “We have our ambitious money and our protection money”, Mary explains, right on cue. 

Many advisors might overlook Mary and Ed. On paper they each looked “all set” just a short time ago. But their retirement and their relationship have created the need for significant changes. In both cases for different reasons their existing advisors were not the best fit for their new lives and the strategies appropriate for their new goals. And though everything is not yet settled in their lives, both Mary and Ed have strong opinions about what they want to do and realize they need help. 

For more information about Mary and Ed, and the entire series of client “personas” created from research by the Alliance for Lifetime Income, please check out https://resources.protectedincome.org/pdf/New-Client-Profile-3-Mary-Ed-ALI.pdf

by Steve Gresham

We Just Flunked the Retirement Test

Industry Leaders Offer First Comprehensive Design Principles

Next Chapter leadership representing 60+ firms reports:

• Objective: Better financial outcomes for all.
• We can do much better.
• Smart design leads the way.

Founded in 1968, J.D. Power enabled consumers to make better decisions. A Mazda design flaw was discovered in 1974, the Wall Street Journal ran the story, and the rest is history.

Great Design = Great Solutions = Great Outcomes

• Most retirement solutions fail to meet expectations for simplicity or effectiveness, according to Next Chapter consumer and advisor analysis.
• Coordinated elements designed to slide effortlessly into our daily lives have become the expectation. Apple sets the standard.
• Toyota, Honda, BMW, and Tesla became leaders because of their focus on “design.”

In the financial advice industry, there is lots of talk about planning, analysis, and adoption. But we don’t connect those dots to implementation. Can we answer: how much money consumers will need for retirement? Or how much will healthcare cost?

Adoption Issues Indicate a Design Flaw

“The owner’s manual is dead,” a colleague tells me. If enterprise software doesn’t immediately improve process and experience, it will be dead on arrival. Winners provide intuitive products and services, which guides effective design. David Dintenfass, Fidelity CMO frosts this cake: “True customer centricity is an act of profound humility."

Design Principles

Great design is a function of an ecosystem that connects with what the user cares about and produce the results they want. Electric cars achieve this only if there's a support structure of charging stations. The principles of compelling design need a support structure because the focus is achieving the desired result.

Cars and retirement advice are complicated. The car buyer wants reliability, efficiency and to feel good about her choice. “Retirement” needs to do the same. Lots of moving parts in both worlds and both require supportive systems. We test cars and ask drivers what they think. We can do the same with retirement solutions.

Ask the Experts

Next Chapter was started to “rethink retirement.” Industry leaders were invited to explore the topic. We set up teams and looked at all key parts of the retirement planning eco-system.

• Client Communications
• Digital Capabilities
• Easy Client Experience
• Financial Wellness
• Easy Client Experience
• Retirement Income Innovation

The teams began collaborations in May 2020 and asked:

1. How should we define "retirement advice"? What is “financial wellness”?
2. How will we know we are solving client needs?
3. What do advisors need to be effective and efficient?
4. What does a SWOT analysis reveal?

NextGen Leader Handoff

The Next Chapter Advisory Council examined the six areas and turned over the work to a network of “rising stars” – nominated by the Council or were MMI Pathway to Leadership participants run by Sarah Nau. 60 recruits from 50+ companies asked: How could we sharpen existing offerings and what should guide future efforts?

Next Chapter leaders led the discussion sessions and EY supplied a support team to facilitate the work. We named the program “Leadership in Action” – these are the future company leaders already in significant positions.

Each team contributed fresh perspective and common sense to the task of defining principles in the design of retirement products, processes, and solutions. Ten Common Design Principles and six additional perspectives for each retirement design topic emerged.

These tests reveal design challenges like:

• Who is delivering the solution to the client? What is the added value – is it obvious to the client?
• When is the best time to propose or deliver the solution?
• Where should the solution be available? How do we efficiently deliver the solution?
• Why is this solution important? Do family members know why this solution is needed?

Winners Only Please

The value of good design is in the outcome – whether it's a product, process, experience, or solution. “Better outcomes” is the objective of our work on behalf of clients and includes a greater ease of doing business for advisors. Testing existing capabilities for the quality, empathy and effectiveness of the design is now possible thanks to the efforts of our Next Chapter participants and leaders.

Stay tuned for more information as we apply the learnings to existing capabilities and as we develop ideas on next best practices. Why not let smart design lead the way? And, have the humility to admit when we can do better.

by Steve Gresham

Retirement on the Eve of Destruction

The year is 1965. Vietnam, racial tension, and voting rights are all over the news and both the Cuban missile crisis and the assassination of President Kennedy are open wounds for most Americans. This is crazy, we’ve had enough, said the youth of America now also facing the draft for a conflict they decried. Songwriter PF Sloan put their anger to music with the “Eve of Destruction”. Radio stations around the world banned the tune and some in the media said it represented everything wrong with America’s youth. 

That youth was the Baby Boomers. And they are frustrated again. This time the object of their  wrath is not challenges to their youth, it is to their age. They are worried about being able to continue their independence in retirement. Why is this so complicated??

Beware the Boomer

The demographic wrecking ball of Boomerism has been steamrolling industries for sixty years. Ask Detroit, Sears, Sony, IBM (Wang?!) and AT&T (the original version). Don’t mess with these guys. They want it their way and they reward businesses that step up. If you don’t – ask Blockbuster or an Oldsmobile dealer what happens. Right, you can’t….

What is particularly interesting about the current environment is that as a society we possess insights and tools more advanced than at any time in our history and yet we continue to be dogged by a pace of change more consistent with our past. That feels to me like a “will” issue instead of a “skill” issue and therefore completely in our control. 

Good Results on the Surface, Weakness Underneath

The pandemic has not helped. COVID accelerated some areas of demand – health care, retirement, virtual meetings and a hybrid workplace – but at the same time seems to have slowed the reaction time of companies, which depend more than they realized on in-person interaction. Inertia of existing systems and mostly supportive markets have been supporting company earnings, but the underlying weakness is clear when we examine organic growth.  I’m not sure when and how corporate leaders will regain speed. Urgency is hard to muster when you have good earnings but the changes needed to adapt to hybrid work are underestimated. 

Three Forces Already Ahead – 

Three essential components of our advice world are now wildly changed from their status pre-pandemic and even from a few months ago. Reactions abound, but so far more talk than action.

1. Investing – the ink is barely dry on most obituaries for the 4% rule and now there’s a 4% T-bill again and a 5% CD. Inflation is a lot higher but haven’t we seen this movie before? Wait a minute – no – most financial advisors have no experience at all with meaningful levels of lost purchasing power. Didn’t adjustable rate mortgages just reset to DOUBLE? Is my oil bill the only one that is significantly higher? And electric, and property tax, and eggs and just about everything you buy?? You know who does remember inflation? Baby Boomer retiree clients. And it’s a bad memory. The winner products will answer the questions being asked now by clients – What is the risk? How will this product help me achieve my objectives? Planning has replaced investing as the driver of retirement success, yet only a small minority of advisory firm clients nationwide say they have a financial plan. What are the chances an advisor can hold on to clients content not to know what they will need – until they need to know?
2. Growing the Practice - Everyone’s talking acquisition. And that’s a strategy but it’s not organic growth. The lesson learned by other Boomerized industries is that when you start buying growth instead of creating growth you quickly lose the ability to create and to innovate. Big Pharma has this disease and it’s palpable. In a rip roaring bull market for the advice provided by good advisors (see more https://theexecutionproject.com/out-with-the-old-bull-in-with-a-new-bull/ ), good advisors and their firms are indeed winning business from competitors. What are they selling? Protection. Preservation of hard won gains, careful planning to survive retirement, limiting the risk of outliving your money, protecting against the costs of healthcare. “Growth” is a new game but the metrics of success are the same – if you aren’t earning net new assets (retention + consolidation) and higher share of wallet, you are in decline. Period. You don’t see Fidelity, Schwab, Vanguard buying books of business and laying off HQ staff. Just sayin’….
3. Leading the Business – Holy cow. Where do you start with the new realities of business? Large firms and small have been turned upside down by workplace preferences, training challenges, development issues, diversity requirements and expanding customer service needs. Not to mention the retirement wave of older advisors and the lack of interest from young people. “Leading” is a much different vocation than “running” the business. The myriad demands of the current workplace have even the most skilled execs scratching their heads, which indicates real trouble for financial services types that are too often just older portfolio managers or sales folk. I saw a pretty solid investment firm nuke three long-time employees a few weeks ago because of “the market”. For the record, that market is still multiples higher than it was for nearly all of the careers of the terminated professionals. So what happened? Beware the “margin defenders” – they are the least capable of handling the new leadership realities. Remember when Ford President, Bob McNamara shot down the idea of smaller cars? Innovation, creativity, genuine interest in the business, genuine interest in people – all are characteristics of the new leader. If you don’t have what it takes, go back up to #2 above and find a buyer. 

Pareto’s Revenge: Embrace the Middle

Savvy advisors and their firms are indeed on to these issues. We call those people “winners” because they look at the market realities and take action – and take advantage. GM vs. Toyota and BMW – how’d that turn out? Why is it that separate organizations of very smart people can “see” completely different future paths? Is it just their love of current success? One clue has always been to see not how the best clients are doing – or feeling or saying – but to look at the middle. How does the average client, the typical client, the median client fare in your current state? Too much focus on the top avoids the reality check of your depth and breadth. Even in a single advisory book. Retirement is a complex array of dates and needs that are defying many advisors’ ability to keep up. That’s trouble for sure – and a historic opportunity for growth minded professionals who are prepared to offer an alternative. 

One Upping the Boomers

Destruction is only bad if the object of destruction is worth retaining. The 1965 song called out Vietnam, the draft, the threat of nuclear war, discrimination, Middle East conflict – nothing good according to most everyone of any age. 76 million American Baby Boomers would now add their fear of aging poorly and poor. But take note – the rising cohort of Millennials is actually bigger than the Boomers and has its own list of complaints including climate change and diversity. They will shape the world as their parents have with impacts already visible in banking, electronics and retailing. And they are new growing power in financial services.

Where Boomers and their Millennial kids are joining forces today is around simplicity of process and the assurance of better outcomes. The Boomers pressed for change like ATMs and toll free telephone numbers while their offspring double down on access and ease with mobile apps and simpler products. What Boomer expected brokerage commissions of zero and ability to send your own wire transfer? Millennials expecting both are also asking why can’t results be guaranteed? Every generation sees injustice in the current state and first finds its voice sharing its frustration with its parents. Demand more, they say – and they are right to expect better. Retirement is a family affair, and the Millennials will be riding shotgun for their parents and deciding which advisors and firms will be their choices when they have more assets. Top advisors seeking growth for years to come are including these important consumers into the plans of their current clients and have the lead for retention and future growth. Follow another winning consumer formula – simplicity and ease of use – and see how Apple products appeal to both generations or how easy both find the Minute Clinic at CVS. 

JOIN US February 21 in Brooklyn as we take on Investing, Growth and Leadership at Retirement on the Eve of Disruption, presented by Next Chapter and Financial Advisor

by Steve Gresham

Finding Jackie

Jackie is the ideal client. She is busy with her family and friends, she doesn’t have time for worrying about the markets. She trusts her financial advisor, Anna. Her savings are divided among a managed account and annuities. She collects Social Security. Her adult children all work with her advisor. She loves spending time with her grandchildren and she does not know who Jerome Powell is or where the Dow ended yesterday. Jackie has financial peace of mind.

But Jackie was not always this content. She did not know Anna until her husband, Bill was diagnosed with terminal cancer.

Bill was an engineer. He built and repaired computers for fun. He did the taxes. He built a deck on the back of the family home for Jackie and the kids. He was a pretty good investor and always told Jackie, “Don’t pay fees”. He did not interact with the advisor assigned to his account – Anna – resisting all of her attempts to connect. 

The diagnosis of multiple myeloma hit Jackie like a freight train. Busy with her children and her job in the local school system, she left all the financial and investment duties to Bill. She had never written a check. The implications of her forward path were now crashing down on her. She left her job to care for her husband.

Bill’s illness changed his view of Anna. He reached out to her and asked for a meeting – the first time Anna would meet Jackie. Jackie was apprehensive but Anna immediately put her at ease. Anna smiles when she shares the nickname given her by one of her clients, “Mama Bear”. Jackie would later tell me, “She saved my life”.

Bill helped Jackie understand the family financial picture, including the household expenses, checking and investment accounts – even the tax returns. They spent time together and with their adult children and grandchildren. Jackie built a crib for one of the babies under the watchful eye of Bill, who had grown too weak to do the work himself. 

Bill’s initial longevity prognosis was 3-4 years. He and Jackie enjoyed seven years together – no doubt due to her attentive care and positive energy.

Jackie and Anna developed a trusting relationship. Mama Bear had never really connected with Bill – he was in her “book” but for sure reflected the definition of an “unengaged” client. Anna had never met Jackie or any of the couple’s four adult children. Bill rebuffed all of Anna’s offers of financial planning, as well as retirement investing ideas. He scorned fees of all kinds – and pointedly told Jackie never to invest in either a fee based managed account or an annuity.

Jackie was not Anna’s first widowed client, and also not the first to reveal a perspective about retirement investing much different from her spouse. Stung by the feeling of hopelessness when Bill first received his diagnosis, Jackie told Anna she wanted to make sure her children never worried about her. Jackie wanted as much structure as possible, she said, with very clear plans in place. Jackie and Anna agreed on managing Jackie’s assets with a combination of a managed account and two annuities.  

Hiding in Plain Sight

Most financial advisors have a Jackie – actually more than one. But many of those Jackies are hidden from view because too many advisors know only Bill and never get the full family view. To be clear, Jackie’s Bill was equally to blame for Anna not knowing about Jackie and their kids. He had control and didn’t think he would lose it. Anna had asked, but was denied. After a point she simply stopped asking.

When we look more carefully at advisor productivity today, we see significant opportunity in that “unengaged” population. At Fidelity, my team estimated the potential untapped business at 75-80% of the total client book and assets roughly equal to the AUA already engaged with the advisor. That’s compelling – basically the chance to double AUA. Firms including Morgan Stanley have made the same analysis, drawn the same conclusions and are now pointing strategies to engage those clients. The ALI personas are in that effort.

We also know that many – maybe most? – advisors are not engaging fully with the family members beyond the primary decision maker. IWI published a survey before the pandemic that indicated clients WITH advisors said only 42% of advisors included their spouse in reviews and many fewer knew the kids. Considering the growing power of women as financial decisionmakers and the importance of Gen X, Y and Millennial inheritors, this seems like a practice management no-brainer. 

The first step is to understand exactly who these unengaged people are and what would help them engage. Sometimes it’s offering a different product or service than the clients know you have, but most of the time the key is reaching out in a way that says you know who they are and what might they be looking for from an advisor. Anna didn’t know about Jackie, but Jackie wasn’t looking for Anna either – and didn’t know she would need Anna until of course she did. Jackie, like many unengaged family members, had no idea of what a financial advisor would do and was completely intimidated by what she thought she might have to know in order to not feel stupid or insecure in talking with Anna.

The Alliance for Lifetime Income has taken up the challenge of identifying Jackie and how to talk to her. The ALI has documented six “personas” all ideal for engagement around retirement income topics but often overlooked by advisors. It is telling that three of the six are women and the other three are couples. Advisory firms and financial professionals have confirmed these client opportunities and the ALI is working directly with national broker/dealers to better engage the six personas. See more here:

https://resources.protectedincome.org/personas.aspx

The rolling demographic age wave is still in its early stages, and the best opportunities for growing an advisory practice are right under the noses of even the very best financial professionals. Truly hiding in plain sight. They are all looking for more certainty, more structure, some tax benefits when possible and – most of all – someone who cares enough to come looking for them. 

Steve Gresham is on a mission to improve the retirement outcomes for clients and make delivery easier for advisors and their firms. He learned at lot managing the relationship strategy at Fidelity Investments, where he was the evp and head of the Private Client Group. Now he leads an industry effort pointed at reimagining “retirement”, Next Chapter, with 60+ companies and 120 leaders, and a consulting firm that engages directly with top firms and broker/dealers, The Execution Project. See more at https://theexecutionproject.com/

by Steve Gresham

2022 Year in Review

My longtime editor and friend, Evan Simonoff of FA asked me for a review of 2022.

Two words - “good riddance”. And I’m pretty sure I’m not alone.

My professional view has certainly been impacted by personal issues including Hurricane Ian, who left my 88 year old mother homeless despite an otherwise air-tight retirement plan. And I’m absolutely certain that anyone hating 2022 also has personal reasons. Isn’t that the COVID lesson - that work and home and family are integrated??

So with apologies to the strict business types, my Year in Review 2022 is a mixed bag of observations, potential trends, and lamentable realities. I want to acknowledge good works but they are currently overpowered by forces our industry continues to resist. We love the bull market fueled results - but that rising tide may have peaked. Time to plan accordingly. For good measure, I’ve made a list of 13. Lucky 13 - take that 2022.

1. Inflation - OMG - okay, so I am starting with the most important one. Ken Dychtwald’s retirement research shows clients picked inflation as the runaway #1 worry. Significant because healthcare had dominated these surveys for years with no real challengers. But then again, inflation has been dormant. This is not historical reality, which is one reason why it is said of history that ignorance of its teachings leads to repeating the mistakes. As an industry sage, I am able to remember my first year in the markets as an intern when TBills were 15%. No typo here. The CPI took back 13.5% No typo there. $1 million nest egg paid you $150,000 risk free, state tax free, and with a modest real return. After Fed Chairman Volcker slayed the inflation dragon - my first year as an investment manager - 1982 - the asset class winner was the long 30 year Tbond at 52% total return. No typo there. But some great memories….The drivers of the New Inflation are here to stay for awhile - it’s not all monetary policy, which is now totally hackable by any hedge fund anyway. Structural issues will take years to resolve. Expect more trouble ahead.
2. Airlines are not the same. For my travel money, Delta has its act together and it matters. Newbie on the block, Avelo, has made it easier to get to Baby Boomer retirement hot spots and most every plane is full. Some growing pains but keep going!
3. We are not alone - the globalization of bad things. Marsh McLennan’s no nonsense ceo, Dan Glaser, said it well. On stage at the EY Insurance Executive Leadership Summit in May, he observed, “Who knew we’d have to factor in thermonuclear war as a business risk?” Most Americans have long lived the delusion we have no real enemies beyond our borders. But even the most isolationist Red Stater has learned about global interdependency when trying to fix a truck or tractor dependent on a Taiwanese microchip. Don’t get me started on gas prices. Or that we need baby formula and find out where it’s made - or not made. Information theft and other non-US based electronic invasions impacted countless schools and utilities and ordinary businesses. No one is alone - or safe - there is no way off this grid. Best to plan for the worst.
4. There is no reason to drink bad wine. I wanted to hate the Vivino app and WSJ Wine but I love them both. Convenience, convenience, convenience. And both get you good stuff for good prices. I never thought I’d drink a no-name something from a publishing company - and like it. Go with this flow. Pun intended.
5. Sneakers with business suits is wrong on many levels. As are white soled dark shoes. Attention men, Larry Fink wears jeans and a sport coat and looks normal. Don’t mix mediums. Wearing hats on Zoom is ok - but only if you have a company lid or are undergoing dermatologist-directed treatment for skin issues (me). And COVID beards should all be evaluated by people other than us. Listen to them.
6. Most retirement planning is a fraud. The most important determinants of a solid plan require conjecture - best guesses. How long will you live? What will your health be? What will markets and rates and inflation do to you? Single scenario retirement planning is just malpractice. Advisors I’ve interviewed say you do the plan based on best guesses and then again with the potential train wrecks. It’s like flying, one said, you arrive at the airport, hopeful for your vacation - and the flight is cancelled. Now what? Plan for Plan B - and Plan C and Plan D…..Ask my mother, who at 88 was modestly covered for everything. Until she was homeless. Anyone think of that? She did own a share in a CCRC (please know what that is BTW) to ensure availability of long term care. Thank goodness - she will go there. Many many many others not so lucky.
7. Mother Nature is one pissed off lady. My mom and her neighbors were blown up by Ian. Much of the West is besieged by wildfires. Atlanta is colder than NYC. Heat waves and drought have compromised our farms. Historic flooding in places you don’t think of as having too much water. And we will never be rid of lethal viruses - 290 of which killed humans last year. I don’t care what your politics are, we need to be aware and better prepared for threats created by this rogue. She’s mad at something - and i suspect trying to send us a message to take seriously the threats to our planet that are growing and will not ever retreat.
8. I thought Top Gun Maverick would be disappointing. I was so wrong. So is the decision to see it on your mobile device. Must see big screen.
9. Retirement is about protecting, not investing. Hanging on for dear life as the markets retreat, financial advisors have to accept investments as a means to an end and not the Main Event. A flash poll of advisors conducted early in 2022 by FA found that when seeking to “reduce risk” for clients, 85% looked to the portfolio asset allocation. A Ken Dychtwald/Age Wave finding this year says that more than half our clients think that “multiple” financial products are needed to address retirement funding needs. Very few people have enough money to make it through retirement. There is leverage for those limited funds in protection strategies using insurance capabilities. Get over the stigma. - the clients don’t share it. And watch for more products that provide more assured outcomes like LifePath Paycheck from BlackRock.
10. Those Baby Boomers are still driving the gravy train. Sick of hearing about them you may be but they have 76% of the assets and own the most products that pay. Note that when the bull market last bottomed in 2009, their median age was only 53. Now it’s 66 and with that age comes a very different list of priorities. Refresh every client like it’s 2009. What now?
11. Comfort is in for good. Casual business clothes may be the best innovation in history. Stretchy material hides some of that Zoom-belly, and we can travel and commute and spill stuff…LuLu - we love you - along with Alphalete, Rawgear, BYLT, Hoka shoes - many of which were born in the pandemic. I’m never giving up my Hermes ties or scarves but there is a new, more breathable world out there!
12. Hybrid work is here to stay but you better master it quick. WFM is a godsend for time starved commuters, self motivated stars, employees with family care needs and geographically dispersed teams. And even there risks abound. Productivity is dropping in many firms dependent on collaboration and internal social networks - or that depend on engaged customer service. From a “future view”, I don’t know how younger employees get coached and grow without the leaders engaged. I don’t think you can pay people to care and I don’t think we have to employ people who don’t.
13. Connectivity is productivity. Common to all nine items on the list above is that success is based on an ecosystem of delivery. Sole practitioners, individual contributors cannot achieve results in a complex world. Whether we are talking about wine, retirement planning or supportive shoes, all need the combination of accurate data driving better allocations of manufacturing resources measured for higher quality and delivered by empathetic distribution. Connectivity is created by leaders whose humility permits them to learn continuously and make adjustments. WSJ Wine is more of a distribution and customer service wonder than a product masterpiece. We know these are winery overruns. But who cares? If an employee proves they can be productive at home, who cares? Look at the end product or service as the primary guide and make your real work the seamless connectivity of the ecosystem. Too often we try to solve for one of the parts and cramp the rest of the system. Solving for WFM is backward. Find out if your product or service delivery can be supported by at-home workers and avoid the coming managerial crisis in evaluating at-home people vs on-site people. Is that really where we want to invest our time?

by Steve Gresham

What Are You Afraid Of?

One of the most difficult situations I’ve experienced in my life was the sudden homelessness of my 88 year mother – driven from her longtime retirement sanctuary in Sanibel, Florida by Cat 4 Hurricane Ian on September 28. For her, truly paradise lost.

Modest spenders, my parents lived off of four annuities and a New York State pension – all benefits from my father’s long academic medical career. They lived below their means and managed to add a bit to their bank account every month for years and more after my dad passed away in 2016.

If you asked my mother at any point in her retirement what she might be afraid of, she would answer, “I’m afraid I won’t be able to live in my home”. She battled the idea of a CCRC on the mainland when I pressed them to have resources for long-term care. My dad thought it was a great idea. He got in trouble with her….but she finally relented with the hostile promise she would never live there.

My mom’s view about the CCRC has changed twice. First when my dad was diagnosed with pancreatic cancer and had a convenient place to receive the care he needed. Second when she realized she will not re-occupy her house. Many of her friends and neighbors are not so lucky – too many lacked home insurance and many more have insufficient resources to fund their longevity.

If We See Something, We Have to Say Something

I watch and interview advisors as they navigate the current marketplace and I am always impressed with the ones that can say really tough stuff to clients but do so in a way that is not offensive.

Walk a Day in Client Shoes

Ponder for a moment a situation when you got good advice you didn’t exactly ask for. Someone stepped forward and gave you advice on a tough topic or in a tough situation. Something you didn’t want to hear or hoped was not true because you sort of knew it was.

Who was it? Trust plays a huge role in providing effective advice on any subject and trust is built on history. History of knowing the person - a relative, family member, a friend - or a professional whose advice has been good.

Get Good at Bad News

How did the person communicate? Did you get a text? “Steve, your insurance coverage is completely inadequate and your asset allocation is all wrong”. Thanks, right? No, they probably talked with you - live - and invited your response. You might have walked away in a huff - but you probably didn’t. Their demeanor was probably serious - but didn’t have to be if you have a good sense of humor.

What did you do? If a trustworthy source communicated openly with you, you probably at least thought about taking action. And you now know there’s an action that someone who cares thinks you should take.

Now we have the headset for asking, “What are you afraid of?” Done right, asking what someone fears is the first step to making them feel safe.

What you say is less important than how you say it. Most communication is non-verbal. Your experience has to be known to be respected. Why you? Why follow?

Have an Opinion

If you are empathetic - and informed - you have the gift of credibility. A great friend and manager used to say that the secret to effectiveness is:

Be available.
Be concerned.
Be informed.
Have an opinion.

Advising clients is not a passive activity. In our world, advice is both a noun and a verb. The best advisors have earned the right to have an opinion.

Fear is Good

Fear - it is said by scientists - is actually a good thing. It energizes the body, sharpens the mind and prepares you to confront what you fear. Being afraid of something doesn’t mean you won’t do anything.

The best advisors channel their clients’ fears into actions. Those fears are often the stimulus to take new steps to match with changing conditions. Like drops in the market or an unexpected health event. A new client fear is actually a call to action - an opportunity for advisors to add value.

Fear Prefers Company

Have your best stories at hand. Ask permission to tell clients about other clients like them, says storytelling master, John Diehl. Bad stuff doesn’t really play favorites - it gets around like wildfire - or mold. It has the 1-2 punch of either a bad impact or bad timing. Or both. Either way, you’ve seen it before with other clients and the newly impacted folks can find some comfort in your experience. So share.

The bottom line is that retirement will always be a new journey for every new retiree. You are the guide by their side who may not see the pothole in the road but you know it’s out there. And you know what to do when it flats the tire.

The real fear most vexing to clients is that many - maybe most - are afraid they will never find you.

by Steve Gresham

FinTech vs FinTalk

I marvel at the brilliance and passion of inventors. Today’s FinTech pioneers have that stuff and challenge convention with ideas that shame our legacy systems. These geniuses cannot understand why clunky incumbent “tech” persists when better ideas are here for the taking.

And yet most of the inventions never get commercial traction. Demos aplenty and lots of “great meetings” raise hopes that slowly drain away. A sort of “innovation expiration” sets in as the effort loses momentum - and funding - and the innovators retreat to ponder their next move.

Don’t Leave - We NEED You!

We just don’t know it most of the time.

I’ve seen five different causes of the disconnect between much needed innovation and actual success. They are all related and therefore can be either be the spark of rejection or the nail in the coffin of failure.

Numbers - Houston, We Have a Proliferation Problem

@MichaelKitces and team are just brilliant. One of their first great works was the now widely known FinTech Industry placemat of capabilities - all on one page. Innovation has forced some font size shrinkage but that single sheet still captures the landscape. And what a roster it is:

• 186 capabilities in 29 categories
• 24 portfolio reporting applications
• 14 financial planning packages

Daunting.

By comparison, there are a lot of stocks and many more bonds but their world is simplified into S&P’s 11 sectors and the bond world’s 14.

Consumer products are more disciplined - consider the five categories of toothpaste. Even cars sport only 12 categories according to JD Power (though mechanics claim 20 - innovators are everywhere).

I know some CIOs at big companies. They cannot begin to understand the number of offerings. But most also fail to investigate. Do they have active efforts going to find new ideas? More on that in a minute.

Priorities - If Everything is Important, Nothing’s Important

A recent report from a top consulting firm outlines the top most important trends in tech for 2022: 14!

I’ve been in a lot of strategic planning sessions over the years and I’ve not yet seen or given a presentation about 14 trends. And I’ve never seen any successful corporate plan with so many objectives. I know that’s not the point of the work but who and how and where do executive teams find their target?

Corporate focus is a process - it has to have an objective easily conveyed to the full team but also must emerge from the company’s capabilities and values and existing foundation of success. A true company success is a build - not of an entirely new house on raw land but rather improvements to an existing structure.

Don’t view that foundation as a constraint, view it as the solid base on which to grow. Call that a Kodak moment - since Kodak had it and lost it.

Breaking Through - The Pursuit of Acceptance

Another top consulting executive was asked recently about InsurTech and brilliantly observed that most die on the runway having spent most of their venture backing on buying awareness they hope will translate into acceptance. He laments the spend of up to 80% on promotional web search. “The only people making money on that innovation are Facebook and Google”. Wow.

He went on to say the industry needs to work harder to identify emerging technologies and the entrepreneurs behind those innovations. Allianz is one of the firms that has stepped up - creating their Onramp Insurance Accelerator with Securian as well as making investments in capabilities such as LifeYield.

ROI - Why Should I Buy?

This one is on the FinTech firms. Without a clear connection to the buying firm’s bottom line, I cannot imagine any real company writing a real check. And I’ve sat in that chair.

A burden carried by many (most?) FinTechies is that they are unapologetically Techies. But the buyers are business people too often of a totally different background, orientation and personal motivation. One of the most entertaining moments in corporate life is gathering the senior team with a FinTech innovator team and watching the awkward proceedings. Nothing in common - even the lunch selections can be odd as they reinforce the differences.

Integration - Don’t Be an Island, Join an EcoSystem

No company is buying any application for an open hole. There is something there already and it is connected to a bunch of other stuff. None of it might be good. Some of it could be - but you don’t know. And you don’t know what they know or think. Connectivity is all that matters and the ability to connect is as important as the capability. Don’t be the only grounded three prong plug in a workshop full of two prong outlets.

How do you connect??

Adoption - A Problem of Design

My favorite for last. This element is owned jointly by buyer and seller of FinTech capabilities.

First we pick on the seller - did you design your product to be excellent or to intuitively and naturally solve a problem? The sale of “better” is a lot more difficult than “easier”. Most adoption of everything is a function of greater ease along with improved results - so adoption is a function of the DESIGN. The owner’s manual is history - don’t force it on an already busy FinServ.

But don’t walk away Buyer. How many enterprise software purchases have failed to attach a full budget for training and integration?? “We can figure it out and save…” is one of the most devious enemies of corporate success. A race car in the hands of a driver who can’t drive is a …. stupid waste of money. But you get to say you own one….I guess…. IT procurement checks a box and gets to blame the business for failure to drive.

So with admonitions to all sides of the FinTech movement - let’s all just get along and start working together. The upside is worth the effort.

Give me call - we can help.

by Steve Gresham

The Client is Not Always Right

It was one of those “Hello McFly” moments (if you remember the iconic line from Back to the Future with Michael J. Fox). On stage at a national retirement income industry summit featuring brilliant scholars and company CEOs. A panel of confident, self-directed investors said they felt they didn’t need any help (this is before the recent 20% sell off, BTW). “I feel like advisors are trying to sell me something”, each of them remarked. The line of the day came from a top advisor with an insurance company parent that started off replying, “If you feel like you are being sold something, maybe you need something!” Drop the mic – a subdued chuckle rolled through the room.

Perspective is Personal, and Preparedness is a Preference

I’m fortunate to work a lot with the Alliance for Lifetime Income (protectedincome.org), a not-for-profit group dedicated to championing retirement income – supported and funded by 24 of the biggest companies in financial services and retirement. The summit organized by ALI and roundly attended by industry leaders sought to expose all perspectives. The confident over-confidence of investors sounds familiar to those of us who have been around for awhile. If you’ve lost 50% of your account value in a “correction”, you have perspective. That would be most Baby Boomers – the dominant client cohort today and for the forseeable future. The Alliance and its educational arm, the Retirement Income Institute, keep tabs on consumer views with terrific studies like the most recent work, Protected Income and Planning Study with @Cannex - https://www.protectedincome.org/news/in-the-face-of-a-potential-recession-americans-feel-unprepared-for-retirement-and-are-looking-for-protection/

The work of the ALI and the RII shows that people do know better – and they are learning more every day about how little they know.

Welcome to the Curveballs of Retirement

Navigating retirement is a bit like batting in a baseball game against a wild pitcher. You expect the fastball down the middle – the cost of living, healthcare, et al. You prepare for those pitches. But life sometimes gets in the way of the expected and it’s really hard to prepare for the inevitable curveball – like an illness – or a wild pitch like your only home being wiped out by a hurricane. My 88 year mom was standing tall at the plate for the first 25 years of her retirement. My dad set up four two-life annuities from his universities and had a New York State pension. Mom gets five checks a month since he passed away in 2016 - and can’t spend the income. And then Hurricane Ian blew up her idyllic Sanibel Island world. Safely evacuated by my nearby sister, she is crushed but grateful to also own a share in a continuous care retirement center on the mainland where she can live safely and close to both professional care and longtime friends. She no longer remembers how she fought that idea….

Helping Clients Learn How to Hit the Curve

I continue to fear that most people are not prepared for retirement. That’s a big statement, but understand the perspective. Most people don’t have the cash to survive a protracted retirement. Longevity will suck up their savings. Especially if markets and interest rates don’t cooperate. And especially when big expenses, aka curveballs, are added into the mix. A very interesting interview I conducted recently with a terrific advisor revealed his approach to longevity education and planning. He navigates clients through the regular planning process with Money Guide. He congratulates them and thanks them for their patience. Then he says, “And now we do it again – with the ‘what-ifs’ included”. Time to learn how to hit the curve.

That Wild Pitch Just Might Hit Your Head

More and more smart thinkers are talking about the non-financial issues of retirement, or what my ALI colleague Mike Harris calls, “emotional finance”. Your client might have money for retirement but an undeveloped sense of what you will do in retirement to avoid isolation, boredom, lack of purpose. I see those forces eating away the spirit of friends and relatives. Another great industry colleague, Eric Sutherland of PIMCO rescued his mother from her retirement paradise but she lost her friends as they fled to disparate locations. And don’t try to tell me that pickleball is enough to engage a Type A businessperson at the same level. Silver lining: my aging orthopedist stays young fixing those folks.

Practice Management Pandemonium

The bottom line is that there is now building a slowly moving conveyor belt of pre-retirees, new retirees and wannabe retirees, all in various stages of education, realization and comprehension. Unlike the relative order associated with investing for the future when everyone is equally impacted by markets and news – this lineup is all over the place. If I stretch that baseball analogy, we have an unlimited roster of players (clients) of varying abilities facing an equally prodigious pitching staff firing pitches (life events) of all kinds at all of them at once. And that is now the typical advisor’s practice – a free-for-all of issues and events across multiple generation families scrambling to adapt. You will be tested as never before by the sheer volume of activity. Organization, teamwork, digital support all play a role.

Objective: Be Worthy of Being Consulted

Master the madness. Help people face the curveball and at least deflect its damage. Listen to them explain what happened. Listen more. Ask questions. Only then can you provide some perspective, some education. And then listen some more to reactions. There is plenty of time to suggest actions to prevent but seldom any time to linger over an unexpected head shot. Sooth, calm and balm. The best advisors know these events happen, they know how to handle them and that the most important step is listen well. That’s what defines a great advisor in this crazy land of retirement – a listener who has been there and can project their professionalism through their confidence.

by Steve Gresham

Your Retirement Needs an Eco-System

Wikipedia says an ecosystem is “a community made up of living organisms and nonliving components.” A digital ecosystem is a “distributed, adaptive, open socio-technical system with properties of self-organization, scalability and sustainability.”

Welcome to the cutting edge of retirement planning.

In my retirement utopia, clients know the answers to important questions. How much will I need in retirement? How will I pay for healthcare? Can I safely age in my home? They have confidence in the answers to those key questions – and others. Collectively, we call that “wellness”. They call it “peace of mind”.

In my utopian world, financial professionals are able to provide those answers. They are challenged by the underlying complexity that is most often lost on the clients. Effective and reliable solutions are the common objective of clients and financial pros, but there are a lot of moving parts to accommodate, including vagaries of health, financial markets, the penalty of taxes and the longevity of the clients themselves. The questions are simple, the answers not so easy.

Enter The Eco-System

Creating a solid retirement solution involves several asynchronous variables – the Rubik’s Cube of planning objectives. Investment management plays a role, actuarial science has a view, client behaviors and preferences weigh in. Information flow is critical. Financial planning software collects data and mixes scenarios. And all of these capabilities have to talk to each other or the result is a jumbled mess of one-off “answers”. The music store instead of an orchestra.

I like the ecosystem definitions above, especially when they are combined. The interplay between “living” and “nonliving” is elegant science-speak for the dual and complementary roles of technological efficiency and human touch. Financial services technology in the retirement planning utopia is not a replacement for advisers; it’s a tool set that creates capacity and better service. The second definition — the digital ecosystem — goes further: adaptive — open — self-organization — scalability — sustainability. The ecosystem is less a collection of parts than it is a dynamic combination of elements that evolve with changed conditions. Orchestra-like.

No Retiree Left Behind

Competitive retirement planning offerings should have the same flexibility – and efficiency. Can we really say that every client feels covered for healthcare costs, protected income and has adequate liquidity for big expenses in retirement? We will be judged at some point not just by the quality of our solutions but for the ability to reach all of the clients in our care.

We can debate the key parts of a retirement planning ecosystem, so I will start the dialogue with my top ten observations:

1. Wellness. Wealth without health or health without wealth? Each is half a loaf. Retirement planning without integrating health care funding and longevity planning is just malpractice. Wellness is highly subjective but assumed by our clients. Read more https://theexecutionproject.com/the-business-of-wellness/
2. Taxes. The second issue uniting all the world’s clients is taxation. If we can’t talk about the impact of taxes — all kinds of taxes — then we can’t really say we have a comprehensive plan. In retirement, taxes are especially significant. Knowing which retirement account to draw down remains among the very top client concern.
3. Regulation and its impact on client engagement and risk. A mouthful for sure, but the shorthand is that “best interest” is table stakes and most consumers would be horrified with anything less. The world’s fiduciaries are increasing in presence and power. Doing good and doing right are pillars for running a good advice business. Do we really need the federal government to design our business strategy?
4. Digital investment services. So far beyond the label of “robo,” these capabilities are a godsend for busy advisers working with multiple family generations. It’s now time to reverse the order of their introduction. First design everything we can to be delivered through the 24/7/365 machines and save the humans for only the most essential work of understanding and translating client needs and concerns.
5. Automation of client data and adoption of centralized data management. Will this generation of advisers be the first to eliminate Excel and the Post-it note? Adoption of powerful tools lags way behind their creation. Give that CRM company a chance to prove it’s not just good for mailing lists.
6. Communications. Three principles here: how, when and why. Flexibility in the ecosystem customizes your outbound messaging by sharpening the content and its delivery. But our language has to improve. It’s not just jargon – it’s volume. Applications and prospectuses raise more concerns among most consumers, defeating their intent. We must do better. Language is the fastest way to change perception.
7. Security, Created by Protection. Three perspectives here. The first is to ensure protection and integrity of client information. Attackers abound. The second is to increase focus on the vulnerability of people as they age. We are still in the lip-service stage here. And finally, we have to include “protection” in our lexicon of solutions. Every client has a balance sheet and all but the most wealthy will need to leverage their assets to provide protection against the risks of living too long, costing too much or needing liquidity for big expenses. Where to start? How about a retirement paycheck?
8. The risks of an aging population. Doubling down on “security”, take a lesson from the historic collapse of the Big Three automakers: Demographics matter. The baby boomers own the market for financial advice and pay most of the bills for years to come. Their median age is 66 and they likely trail​ two attached generations with them, along with a myriad of accounts and complexity and risk. Read more: https://theexecutionproject.com/chart-of-the-decade/
9. Adviser hiring, training and retention. Where to start? Surveys suggest top advisers average age 55-plus, and very few young people seem to be entering the industry. ‘Nuff said perhaps – but what to do? We can spend a lot of time here. Financial professionals still in the game have the best opportunity in decades to build a fantastic business. But it will be different from the job of the past 30 years. Getting through a retirement is different than saving or investing for one. Different skills, different systems, different leadership. Older advisors are partnering with younger folks with complementary skills. Real retirement advising needs a team.
10. Integration. The inability to see all of your accounts and all of your investments makes clients crazy and prevents financial professionals from providing an effective retirement strategy. Annuities have to be included on the custody platform along with managed accounts and individual securities. Everything has to be in the planning software as well. And then we need to optimize – truly - across the household for risk and tax liability. The very best advisers do this today with heroic effort that begins with integrating systems not easily connected.

Winners Connect the Dots

Onward. The true north for retirement is simple, intuitive experiences for both advisers and clients focused on achieving better outcomes. Industry leadership has shifted to players creating supportive ecosystems that optimize the best of people and machines. The firms that can integrate the great FinTech inventions and product solutions with simple client communications are winning.

Yet despite the appeal of a unified approach, the status quo is a formidable obstacle to change — most advice firms are experiencing record results consistent with record markets. A deeper look reveals structural weakness in many advice offerings that stand in the way of providing a seamless, flexible and compelling client experience. Let’s see who wins the war for net new assets and share of wallet. The path to success is paved with ….simplicity.

Let’s keep this dialogue going. Check out this summary of the forces now transforming “retirement”. Check out the resources for both consumers and financial professionals at the Alliance for Lifetime Income, https://www.protectedincome.org/, and join the industry leadership in the quest for better retirement solutions, Next Chapter, https://theexecutionproject.com/community/

by Steve Gresham

The Business of “Wellness”

Supreme Court Justice Potter Stewart famously remarked about pornography, “I know it when I see it”. 

Unfairly perhaps, “financial wellness” - or just “wellness” to her friends – is suffering a similar condition by defying consistent description by a notoriously analytical financial services industry anxious to connect better with clients. “Wellness” is fancied by CMOs and some CEOs for its promise of delivering enduring client value, but how do you introduce a concept that many clients might already be expecting – and not receiving?? I mean, isn’t the point of our advice and solutions to make clients financially “well”?? Awkward…

Nail That Jello to the Wall

The squishiness of “wellness” lies in the highly subjective benefits of being well. Not surprising when you consider the nearly infinite array of client situations and family dynamics where healthcare issues alone often disrupt even the most detailed financial plans. There are foundational elements – health, finance, security, wealth transfer – but no easy map to follow, no standardized answer. And that makes trouble for advice providers that don’t listen well or that cannot be both empathetic and purposeful in providing the needed guidance and solutions. “Wellness” doesn’t fit in a product box.

Peace of Mind

“Wellness” is most basically “peace of mind”. That’s how Frank McAleer of Raymond James defines it - he’s the leader of their effort with plenty of experience translating “wellness” into a business plan. That peace of mind includes financial, health and family needs that require preparation. More clearly, “What is the list of stuff you most worry about or that could go wrong as you live longer?” And what about family members for whom you could become responsible? Those lists are different for a 26 year old DC plan participant than they are for a 60 year old pre-retiree or a 75 year old with dementia. Or any of their family members. But the concerns are very tangible to all. Though the inevitable issues of longevity are tough to confront, there is a calm achieved by being ready.

Get Ready for the Wellness Experience

Wellness is the objective of planning - it is both a noun and a verb. An assessment at a single point in time of conditions that are guaranteed to change. Issues of wellness so pervade real life that calling out “wellness” as a concept separate from a plan, even in addition to a plan, seems superfluous. Do clients and retirement plan participants really need to be told we are working to help you achieve “wellness”? Or are we talking to ourselves again, to our advisors and product teams and marketers that we now have a higher calling than investing?

This is the conclusion reached by our Next Chapter study group on Financial Wellness. Wellness is a more catchy, benefit-sounding label than “success”, which is the presumed objective of planning. But clients don’t benefit from the words, they expect the results. I get the same weird feeling when I fly and a flight attendant calls out today’s opportunity to have the Airline X “Experience”. The what? Can we just land on time please? There is nothing outside of a first class pod that is worth calling out as an in-flight “experience”. Marketing overreach.

I’ll Take a Little Empathy with that Investment Portfolio, Please

“Wellness” and in particular “financial wellness” are internal design directives given to financial companies and advisors to make sure they don’t overlook the requirements of “wellness” in the solutions being created for and delivered to plan participants and advisory clients. To wit, the Next Chapter team, including the RJ longevity program leader, Amanda Stahl, named “empathy” as the leading design principle of “wellness”.

A Slogan in Search of a Business Plan

Integrating “wellness” into financial services is necessary to establish and sustain the value of the product/service offering. If the end beneficiaries don’t achieve peace of mind from their retirement plan, benefits offering or the services and solutions offered by their financial advice provider, they can be lured away by an offering that promises that peace of mind. Nothing motivates action more than fear – and there is genuine fear that manifests when you think you will run out of money or have to sell your home and move into assisted living. The reality of this vulnerability is becoming of greater concern to advice firms and plan sponsors who are not actively engaged with most of their clients (see Pareto’s Revenge https://theexecutionproject.com/paretos-revenge/ ).

The Business of Wellness – Five Levers Drive Results

My research and business experiences (successes and many failures) suggest that the most common and most impactful business growth objectives of broker/dealers - net new assets, consolidated assets and client household share of wallet - can be achieved with these actions based in “wellness”. Five levers in rough order of max impact/min effort. Intermediate measures like NPS (we used at Fidelity) can provide earlier confirmation of momentum:

Lever One: Words Matter – The Value of Common Sense Language

even very analytical services like asset allocation and investment policy can be made much more user friendly when rewritten from the perspective of conveying “peace of mind” instead of purely technical concepts and - essential - compliance disclaimers (Big fund companies are the frequent violators here). Language use is the fastest way to change perceptions of a firm, plan sponsor or advisor. Our Next Chapter Executive Board has been adamant on this perspective of improved language – stay tuned. 

Lever Two: Design for Better Outcomes instead of “Best Efforts”

Most retirement solutions in place today are market dependent. Results can be impacted by market risks well known to the designers but not so familiar to the investors. The designers rely on their knowledge of capital markets research and the known risks are further mitigated by assuming a long-term time horizon to smooth variations. That’s a rationale, objective approach intended to work across a broad population – and generally it does. 

But even the brainiacs will admit to “terminal point risk” that awaits unsuspecting retirees rolling out or annuitizing after a significant correction. Today’s retiring clients and plan participants have seen down markets – big ones – in 1987, 2000-01, 2007-09 and some sharp corrections in between. My late father knew nothing about markets or investing, but he knew when the stakes were too high for his peace of mind. He worked for universities his entire career and earned the negotiated benefits of retirement annuities. He surprised me by sharing that he had converted his 50-50 plans to 100% annuities with my mother as second life. He never looked again at the market. He cashed the checks, and she does to this day at 88. My parents’ definition of “financial wellness” was not having to worry about the markets, their income level, their ability to finance healthcare and the ability to age in their home. Done.

Once again, we are in the way of “wellness”. The best efforts approach undermines peace of mind by not providing a certainty of outcome. A risk matrix offering a percentage likelihood of success is great for analytical clients whose peace of mind is satisfied by data, but I don’t believe that represents more than a fraction of clients - especially when “client” is defined as a retiring couple and their family. In most client households there is someone who values protection and guarantees over potential returns or capital market theory, so why not at the same time (go to #3..)

Lever Three: Redefine the Client as a Family and a Household..and Engage

Most advisor engagement remains with a typically male and financially confident head of household. Firms are aware but not yet effective in providing (requiring??) more direction to advisors for supporting the family across today’s most common HNW construct of three generations - aging parents and adult children surrounding a Baby Boomer couple. This demographic sandwich will drive more than 80% of advice industry profits through at least 2030 and success is dependent on retaining existing clients and consolidating their not-held assets from competitors gearing up to mount a similar effort. 

At Fidelity we sought the identity of other family members and developed simple communications to be more inclusive of less financially savvy relatives. We created a specific design target - a Baby Boomer wife and mother - to guide the design of the branch office right down to the furnishings and colors. But the operationalizing of “family” means some serious additions to CRM and data stores as well as some much needed training and coaching of associates that talk to clients. Peace of mind is different for different age groups and levels of financial literacy. Today’s Boomer retirement plans are providing real time education for their children and grandchildren. Some positive, some not so much.

Lever Four: Service Models for Everyone

Fresh off the summer vacation season, we are reminded of the challenges of bringing everyone together. Each family member has their quirks. Separately identifiable service models provide family members with options for engagement - especially with respect to communications, pricing and product options. “Separate” provides space and identity and satisfies each individual’s peace of mind. And that’s financial wellness. Because peace of mind for one client may be the reliability of a paper account statement - for another it may be the immediate transparency of a mobile app. The ability of an advisory firm, plan sponsor and plan administrator to offer a choice of service models - including in-plan advice and fiduciary wealth management (including trust) is fast becoming the expectation of HNW families - and history indicates those expectations roll “downhill” quickly to the mass affluent and beyond. Separate service models allow the advisor/firm/sponsor/platform owner to more easily and consistently focus on improvements for unique cohorts. Each needs to know we care enough to know and deliver against their preferences. 

Lever Five: Adoption is the New Innovation

Last for a reason, “adoption” here refers to the integration of “wellness” principles into the delivery of services and solutions. There is both a “will” and a “skill” perspective to adoption. Financial advisors may or may not have the skill to help clients plan with the full empathy needed to anticipate the needs of an aging parent or pay off a child’s college loan. That’s a management problem for an advisory firm to make sure empathetic advisors are in place. Bull market success further reduces the incentive to engage - the “will” - as well as the energy to reach all of the clients in a given advisory practice. This failure to engage creates real risk for firms with low share of wallet - as we saw with Fidelity in 2009. Especially if their engagement is wholly dependent on the will of the human advisor and does not - as we did at Fidelity - complement busy advisors with consumer outreach in support of advisors to drive warm leads. But wait a minute, Merrill Lynch did the same with Total Merrill 20 years ago. The future of large scale client engagement is to provide some level of lead generation and direct-to-consumer outreach on behalf of advisors and not rely on human advisors to fully shoulder the burden of optimizing the opportunity of the full client roster. 

Discovery: We Can Design for Adoption

Adoption is also a challenge to the operational eco-system of the advisory firm or plan administrator. Call it “ethos” or values or customer centricity, the issue of wellness adoption by the eco-system is simultaneously an issue of empathy and humility and the willingness to invest. Removing friction from systems benefits consumers and delivering associates. But it needs a vigilant champion empowered to take action. And budget to improve system effectiveness. 

The reality of adoption is that it is seldom achieved because of either will or skill. Adoption of the complex array of anything - including the myriad “wellness” measures needed to produce human peace of mind - is most often the product of DESIGN. The most adopted products and procedures lend themselves to adoption because adoption was one of their creators’ key design principles. In the popular consumer view, if I need an owner’s manual to understand a product, I might not want it. Financial firms seeking better and more comprehensive engagement of plan participants and advice clients will increasingly have to facilitate that engagement, not hope that if they build “wellness”, people will clamor for it. 

The Business of Wellness: The State of Mind to Create Peace of Mind

The bad news for companies is that “wellness” is not a widget they can attach to their existing offering. That approach has been attempted with the best of intentions by retirement income product providers who developed myriad riders and benefits aimed at specific consumer objectives and concerns, like combatting inflation or funding long-term care. In the hands of good advisors during the planning process, these products and their capabilities can provide invaluable peace of mind. But complexity of the products and their sometimes inconsistent availability (and pricing) are barriers to more consistent use in planning - and adoption by more advisors. These barriers are beginning to fall as demand for peace of mind – protection, security – rises and firms respond. 

“Wellness” Requires Technology, Humans Alone Can’t Ensure Peace of Mind

To achieve its true potential as the True North of retirement solutions, “wellness” has to be integral to the language and the systems and the solutions of the firm. Despite the good intentions of many service contacts and financial advisors, the human resources of the industry don’t have the capacity to accurately record and maintain full engagement with clients, participants and their families. There are too many people to track, to proactively provide information and to be available to help establish and maintain “peace of mind”. I will never forget the call from a seasoned advisor who had completed his outreach to a HNW family, with the help of the head of household. “I now have nine clients instead of one!” He was only partially kidding. It’s a lot of work to track the needs of families and you don’t want to be the advisor who missed a Medicare election, a life event or the 21st birthday of a beneficiary. The solution is a combination of proactive systems leveraging data, simple tools that can be accessed by consumers and help self-actualize their needs, along with old school training, coaching and learning for all human associates for how they can best succeed in a company dedicated to “peace of mind”. This is the Village of Adoption needed to establish human leaders and delivery champions, DIY options for consumers and data-based processes to ensure the reach and consistency of engagement. And that is the #1 job of today’s financial firm CEOs, creating peace of mind – aka “wellness” – for BOTH their clients and associates. 

by Steve Gresham