LaValley: Providing valuable retirement advice

Not long ago, I was making a presentation on the role of a retirement advisor to a group of financial planners. In my audience were advisors with a wide range of academic credentials and experience. Our discussion focused on what a retirement advisor was supposed to do for a client and how much expertise the advisor needed to call him or herself a “retirement advisor”.

I told the group they were all retirement advisors and they should explore ways to become as relevant as possible in that role. The most senior advisor in the room was a thirty-year veteran who had every possible designation. After my statement, he stood up and told everyone they had no right to call themselves retirement advisors unless they had the proper credentials and letters after their name. Oddly enough, he was also looking at his own retirement and told me before the session he had no idea what he was going to do when the time came.

What does a retirement advisor do? Was this advisor correct in suggesting that many advisors across Canada had no right to call themselves “retirement advisors”? My emphatic view is he was losing his perspective on the role advisors have in the lives of their retiring clients. While he was right that clients need access to the best possible advice, I am not convinced that simply having designations make you an effective retirement advisor.

What your clients need from a retirement advisor

In my experience as a retirement transition educator, most Canadians entering retirement are very clear on what they are retiring from. What they are not sure of is what they are retiring to.

Their financial advisors have positioned retirement as a financial issue; they equate retirement planning with leaving work, paying for a thirty-year long weekend and calculating the magic number that will ensure a happy retirement.While I understand income calculations, tax and estate planning and investment management are important elements of retirement planning, they represent the strategies an advisor uses to put the plan into motion.

These elements are not the plan though. They are in response to the issues that the discovery process identified. A retirement plan is a combination of goal clarification and strategy. The retirement planner is a combination of the visionary who helps the client clarify his or her retirement goals, as well as the strategist who finally puts it in place.

That puts the advisor into the role of educator, coach, mentor and or catalyst as the client starts to clarify what retirement looks like. Financial planners are taught a six-step planning process, which includes discovery, strategy and implementation. The strategy will require some specific expertise depending on the complexity of their financial situation. However, both implementation and strategy flow from the most important element of the retirement planning process—the discovery process.

The key elements of retirement discovery

The biggest issue for clients entering retirement is not their financial plan but goal clarification. Retirement discovery is as much about life discovery as it is financial discovery. Your clients will need someone who can help them see the big picture as they put together a plan.

There are three key elements of retirement discovery:

Self-discovery

These are things the client needs to understand about themselves and their lives as a precursor to formulating a retirement plan. There is an old adage that says…“People don’t know what they don’t know, because people don’t know what they don’t know”. Since the advisor is not a psychologist, they will try to find ways to get the client to think about the important life issues facing them without crossing the line in their role.

Examples of self-discovery are:

• Seminars with outside experts.
• Web-site questionnaires that raise lifestyle issues (not financial issues).
• Articles, books etc. that bring up topics that are beyond the scope of the advisor.

Effective “self-discovery” doesn’t focus on money. There is plenty of time for the advisor to show value and explore those issues with the client in a face-to-face meeting. I am not a proponent of financial or investment seminars for clients, just as I am not in favor of financial or investment-oriented information that is sent to the client rather than discussed in person.

Lifestyle discovery

This is the understanding the advisor needs to have about the client’s retirement dreams, goals, concerns and opportunities. I call this the “30,000 foot view of retirement”. I have found it easy to organize this discussion into the client’s retirement life areas because, after all, it is a lifestyle discussion.

The six areas that I would discuss are:

• Their health concerns for their family.
• Their work opportunities, including volunteering.
• Their family needs and concerns in retirement.
• Their lifestyle vision.
• Their home.
• Their view of “financial comfort” in retirement or what will it take for them to sleep at night?

This doesn’t have to be a long discussion but it should raise those retirement issues that need to be explored as part of the overall strategy. You are looking for the client to prioritize their needs and clarify lifestyle goals.

Financial discovery

This type of discovery is the bridge between a lifestyle plan and a retirement financial strategy. Most advisors already do part of this as they tie products to needs. However, the right-brain retirement advisor continues the discovery process by focusing on lifestyle issues rather than on financial solutions. The difference is they discuss the financial implications in retirement on specific lifestyle needs.

There are five such needs in retirement that will require a financial strategy:

• Helping and protecting family.
• Enjoying and protecting lifestyle.
• Planning for the expected and unexpected.
• Creating a financial comfort strategy.
• Building a legacy.

This part of discovery will be to identify the needs, concerns, opportunities and goals in each of these areas. As a side note, this approach leads to multi-solutions rather than single needs: for example, a strategy to help and protect family in retirement has a number of potential solutions that would be part of the final plan. Once the advisor has reached this point in the retirement discovery process, he or she can then ask for data, bank information and other financial documents as a prelude to developing strategy.

The role of the retirement financial planning expert

My financial planning friend could have been the facilitator for the first three parts of retirement discovery or could enter the process here. I am far less willing to argue what credentials are needed at this stage because there may be some specific expertise that will be required to create the right strategy based on the discovery.

Some advisors can do both. Others can’t because they haven’t developed the basic people skills needed to have a lifestyle discussion with a client that doesn’t lead to a product sale. (More on that in a later column!)

Retirement advice is both strategic and tactical. Missing from the methodology of a lot of retirement advisors is the strategic part—their ability to really help the client understand the lifestyle issues that will ultimately have a financial consequence.

If you can take this approach, you will be offering your clients something different than they get elsewhere. By the way, you can also brand yourself by this right-brain, life-transition approach to retirement.

Barry LaValley is the president of the LifeFirst Approach . He coaches advisors in both Canada and the U.S. on how to become more right-brain oriented in their approach to client communications. Look for his upcoming Webinar series entitled “Making your message stick” sponsored by the Canadian Securities institute.