One Topic Is Crucial for Retention, Nationwide Says

What’s holding advisers back from having conversations about Social Security? Just 2,700 rules in the Social Security handbook, says David Giertz, president of Nationwide Financial Services sales and distribution. A former financial adviser, Giertz says advisers are reluctant to bring up a topic unless they’re completely up to speed.

But misconceptions about Social Security benefits abound, Giertz tells PLANADVISER. A survey conducted by the Nationwide Financial Retirement Institute found that more than a third of respondents (38%) felt they had turned on their Social Security benefits too soon. They wish they had delayed the onset of benefits.

“Social Security can represent up to 40% of the total income the average worker receives throughout retirement,” Giertz says, making how and when to file among the most important financial decisions they will make. Although many people mistakenly think that Social Security begins automatically or that they should begin receiving it at a specific retirement age, they could lose up to $300,000 in benefits over a 25-year period of retirement, Giertz says, by accessing them sooner than necessary.

A surprising study finding is that people who do not work with a financial adviser were twice as likely to say their Social Security benefits and income were less or much less than expected, Giertz says. “It popped out at us,” he says. “It’s clear that working with a financial adviser allows people to have a better and more successful retirement.” Without a question, the adviser who arms himself with facts about Social Security can add a great deal of value.

“When we talked to these consumers, we found most expect their financial adviser to have a conversation about Social Security,” Giertz says, which makes sense when considering retirement planning as a holistic process. He says it was shocking to find that just 12% of financial advisers are having the conversation about when to take Social Security benefits with their clients. Part of it may be the daunting number of rules in the Social Security handbook. 

Retention Play

But sidestepping the issue could result in clients leaving. “Four out of five people said if their adviser isn’t talking about Social Security, they’re going to change advisers,” Giertz says. Discussing Social Security is a clear retention play for advisers, Giertz says, as well as a fiduciary duty to act in the client’s best interests.

Nationwide found clear differences in the understanding of Social Security between respondents who worked with a financial adviser and those who did not. Those working with an adviser tended to begin collecting benefits at a later average age (63) than those not working with an adviser (61). A substantial majority of those working with an adviser (92%) knew that delaying benefits increases the amount of benefits each year, up to age 70, compared with 77% of people without an adviser who could identify the statement as true.

Those working with an adviser were also more likely to know that Social Security benefits can be offered to a spouse or children (90% vs. 81%) and to know how much pre-retirement income is needed to have a comfortable retirement (74% vs. 62%).

Other findings in the study are:

• One-third of retirees without an adviser say health care costs keep them from living the retirement they expected;
• Retirees who are not working with an adviser are more than twice as likely to say their Social Security payment was less or much less than they expected (33% vs. 12%); 
• Over half of future retirees who work with an adviser who have not been advised about Social Security do in fact expect this type of advice from their adviser; and
• Retirees working with an adviser are more likely (82%) than those not working with an adviser (62%) to say they are able to do the things they want to do in retirement.

The 2014 Social Security Study was fielded online in the U.S. between February 27 and March 4 by Harris Interactive on behalf of Nationwide Financial. Respondents were 903 U.S. adults age 50 or older, either retired or within 10 years of retirement. The survey and its results can be accessed on Nationwide’s website.