Clients May Need More than Retirement Help

Topics like household budgeting, emergency savings, managing credit and debt are not taught in grade school, high school or college, notes Joseph Topp, vice president of investment consulting services at Francis Investment Counsel LLC.

Research by LIMRA reveals 52% of middle market consumers list developing a monthly budget and following it as one of their top financial priorities. Another 77% say they want someone who is willing to educate them and explain what they do not understand about finances.

“We’re going to look back and marvel at the educational needs that exist today,” predicts Topp. “We have the Millennials who are so tuned in electronically that they are not used to carrying money, or manually balancing a checking account, or taking their paycheck to the bank and depositing it and pulling out spending money.”

On the other end of the spectrum is the older generation whose members are not as electronically tuned in. This is where advisers can step in, providing education and tools appropriate for their clients. For example, recognizing a purely electronics approach does not reach everyone, Francis Investment Counsel LLC delivers most counseling face-to-face in individual advice sessions.

Topp suggests advisers incorporate financial fundamentals into the curriculum of their retirement plan education including household budgeting, emergency savings, long-term care insurance, social security, principles of estate planning, the importance of a will, managing and monitoring debt and managing and monitoring credit scores.

With advisers’ assistance, clients have the opportunity to understand better budgeting techniques to improve their financial outcomes now and years down the road. Topp concludes participants should understand the principles of “pay yourself first” and how to utilize those principles properly.

LIMRA research shows a majority (70%) of consumers say it is very important to have enough for retirement, however many think they do not know enough about how much to save and do not know what the most efficient ways to save are.

“I think all households, particularly from Generation X, Generation Y and Baby Boomers, realize retirement has become their personal responsibility,” says Jafor Iqbal, assistant vice president at LIMRA Secure Retirement Institute. “We have found in our studies that any way you look at it, most people will be required to create more than 50%, 60%, or 70% of their income from their own retirement savings. That’s a huge responsibility, but also a huge opportunity for advisers to come forward and help them. Sometimes they don’t know how to execute that personal responsibility, but advisers can help them with that and give them peace of mind.”

In order to meet their clients’ needs, Iqbal suggests advisers take the following action: show clients how to create a retirement income plan and illustrate their projected expenses in retirement, their income in retirement and after they save, and how long their money will last in retirement.

In addition, more than 50% of consumers admit they are not at all knowledgeable about financial products. Specific tools can assist in providing a better understanding of how to budget in the current financial marketplace.

Iqbal explains that simply working with an adviser puts clients a step ahead. Those working with an adviser save about 14% of their earnings for retirement, compared to those without an adviser who save only half that amount (7%) on their own.