Boomers unsure of retirement timing

The older your clients get, the better they are able to determine when they can retire — or so one might expect. For most, that logic holds true, but a sizable segment in the U.S. still has no idea when or how they will retire.

According to a survey conducted by Forrester Research, only those over the age of 62 have a firm grasp of the answers to those questions, with slightly more than two-thirds saying they know the age when they will retire. Fewer than half of older boomers, defined by the study as being between the ages of 51 and 61, are able to provide such a conclusive answer.

The problem is boomers simply are not planning. Just 42% of older boomers have started developing a retirement plan. As Bill Doyle, the author of the study, points out, “fewer than half of all consumers have started a financial plan for retirement.”

Unfortunately, the study is limited to the U.S., but there is room for some comparison to the Canadian market. For instance, the study notes that mainstream households, those with less than $100,000 in assets, make up 62% of the U.S. population.

That market, Forrester points out, is difficult to serve profitably, “especially as advisors move towards a fee-based, financial-planning-oriented business model.” The result — only about a third of households in the U.S. have received advice from a financial planner.

If Canadian investors are anything like American ones, there could be a large portion of the population that has not received any professional financial advice. The latest figures from Statistics Canada put the average household assets at $229,900. Being an average, that figure is likely skewed by the households with significant assets.

There’s a good chance that’s the case, considering the average household income, also reported by Statistics Canada, is $66,500. Even households in the fourth quintile only have an average income just shy of $80,000, meaning 80% of households in Canada bring in less than $80,000.

This means a large part of the population won’t be served by advisors because they don’t have enough assets to manage. This is troubling since, by and large, those who have used an independent financial advisor have said it was the most useful resource available to them, closely followed by life insurance agents and financial advisors at a full-service brokerage.

But what might be disheartening to advisors is that those households that do have the assets may not be willing to pay much for that advice. The less confident consumers are about their prospects of retirement, the less willing they are to pay for financial advice.

Among those who are the most confident in estimating their retirement needs, the average price they are willing to pay to have a financial plan drawn up is $726.76 U.S., according to Forrester. As their confidence level drops, so too does their willingness to pay for a financial plan. Those who stated they were “somewhat confident” would be willing to pay only $491.10 U.S. on average, while those who lack any confidence in estimating their retirement needs were willing to cough up $335.34 U.S. on average.

The underlying message would appear to be to work closely with your clients to build a financial plan, one that they are comfortable with and that has set goals. The payoff is not only a more satisfied client, but it could mean a better bottom line for your practice.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com