Help determine client priorities

After safety, security, and a good night’s sleep, having enough for retirement continues to be the most often articulated client priority, according to advisors participating in our annual Dollars & Sense roundtable.

Demographics is largely the driver here, since the baby boomers are now moving through educating their children and are thinking about their own retirements while simultaneously being squeezed by care costs for aging parents.

Health care costs, which will be a major issue for boomers whether they like it or not, are barely on the radar. And that could have implications for government provided services as boomers live well-past the life spans envisioned by retirement system planners back in the 20th Century.

“Most of our clients are already retired so the biggest thing they worry about is the preservation of capital and having enough to last for 25-to-30 years, and maintain the lifestyles they’re used to,” says Nicole St. Denis, Investment Associate, ScotiaMcLeod, London, Ont.

Many clients, though, are realizing on their own that their retirement plans will have to change.

There’s no question, clients are looking at delayed retirement, or perhaps even coming back from retirement, says Doug Gleed, VP & Regional Sales Manager, Invesco Trimark. “It just comes down to effective planning and surmising their positions, and allowing them to make their choices, while putting them into less risky positions.”

What advisors have to help clients determine, says James R. Taylor, CLU, Financial Health Management, Toronto, is whether or not they do in fact have to delay. “We have to help them answer that question,” he says.

Cynthia Kett, CA, CGA, RFP, CFP, Stewart & Kett Financial Advisors Inc., Toronto, says the re-evaluation of client priorities actually started after the September 11 terrorist attacks, and similar major events around that time.

“Rather than just working, working, working we actually have, for some time, been seeing clients moving to a phased retirement,” she says. “They’re cutting back earlier, but overall working longer.”

Froese says she looks at a client’s overall situation, and simulates different scenarios: What would it be like if they retired now? What would it be like if they retired and worked part time? Or what would it be like if they waited out a few more years? “It’s not an easy conversation to have with clients who’re down 30%, or clients who wanted to buy vacation property and now can’t do it,” she says. “One thing we can do is listen and offer alternatives.”

Factoring in volatility makes long-term planning more effective, notes Bernie Geiss, CFP, CLU, RHU, Cove Financial Planning Ltd., North Vancouver, B.C. He uses Monte Carlo simulations to determine the impact of extreme volatility on client situations. “Advisors are generally conservative in projecting rates of return and asset allocation they use,” he says. “A Monte Carlo simulation is an incredible tool, because it ensures the plan will hold up under a variety of economic conditions.”

It’s also important to keep people focused on the big picture, because investments are only once piece of the puzzle. “When you pan out that investment lens and look at everything clients have got in play—DB plan, life insurance, home, cottage, other investments—what does it do to your financial future?” says Foy-Pilchner. “Some folks are taking solace in saying, ‘Maybe one piece of the puzzle is down 30%, but when I look at the big picture, maybe I’m going to be Okay.’ ”