Key Partnerships

Tina Ambrozy, president of sales and distribution at Nationwide in Columbus, Ohio, points to one such finding, taken from a recent survey her firm conducted in partnership with Harris Poll. According to this survey of more than 1,000 U.S. workers, only 13% of older adults say they have a financial adviser who gives them Social Security advice. The firm recently published the findings in “The Nationwide Retirement Institute® Consumer Social Security PR Study,” alongside a free Social Security 360 Analyzer tool.

“It’s not that they don’t want the advice,” Ambrozy notes. “Nearly three in four future retirees currently working with a financial adviser say they would likely switch to work with an adviser who can help them maximize their Social Security benefits. It’s easy to see why. Those who work with a knowledgeable financial adviser report receiving over 20% more in Social Security benefits per month[—$1,500 vs. $1,234—]than those who don’t.”
According to the survey, most current retirees drawing Social Security income say they relied solely on the Social Security Administration (SSA) prior to retiring to identify their maximum monthly benefit. However, Social Security filing strategies are quite complex and can be far more effective when highly personalized, Ambrozy says. Beyond this, the Social Security staff is not even technically allowed to give advice to individuals; instead they can offer only “information” to near-retirees.

“Social Security is, undoubtedly, one of the most complex retirement topics facing American workers, and most are likely unable to grasp the thousands of rules that apply to [it],” Ambrozy concludes. “Preparing for retirement holistically by working with advisers and online tools can help adults maximize their benefit and achieve personal goals.”

For retirement specialist advisers, the message should be clear: Social Security know-how presents a real opportunity for growth and differentiation. Whatever the exact pathway, when advisers can connect their clients to such capabilities, they will be able to boost loyalty and attract new business, Ambrozy argues. This is true whether the adviser develops novel planning capabilities internally, or partners with a recordkeeper or one of the many emerging third-party service providers that focus on topics such as Social Security optimization, student debt management, retirement income-tax minimization and more.

Naturally, the mechanics of how individual advisers can integrate Social Security planning support—as well as these other types of deeper financial wellness services—will vary tremendously by firm, client type, business model, compensation structure, etc. But it is clear, nonetheless, that both individual clients investing through individual retirement accounts (IRAs) and defined contribution (DC) plan participants investing at the workplace are equally hungry for more advanced financial planning. Thus, how to plan for Social Security is also of great importance to plan sponsor clients—not just individuals.

Like Social Security timing, the topic of taxes bears strongly on the long-term financial health of retirement investors and should, therefore, be a part of retirement planning advice.

To underscore the point, Andrea Millar, director of financial planning for the American Institute of Certified Public Accountants (AICPA), in Raleigh-Durham, North Carolina, points to a recent survey her organization conducted, also with Harris Poll. Survey data shows that nearly a quarter of affluent adults—i.e., those with $250,000 in household assets or $200,000 in annual income—overpaid taxes in at least one of the past 10 years and were owed a refund. In addition, 14% underpaid and owed the Internal Revenue Service (IRS) money in at least one year during the last decade.

“Over- or under-withholding payroll tax can be a strategic move,” Millar points out. “But winding up with a big tax bill or a large refund can also indicate that adjustments are in order. And with updated withholding tables from the new tax law in effect, now is a perfect time to do this analysis with clients.”

According to Millar, a tax return can “double as a road map to a more prosperous financial future. In it, Americans and their advisers can find details of their cash flows, important investment information, insights to retirement and estate planning, and can identify overlooked strategies to help them achieve their financial goals.” According to the AICPA and Harris Poll, life events such as having a child, experiencing a divorce or purchasing a home can all have a major impact on an individual’s tax situation—and, by extension, on his budgeting and investing plans.

“Alarmingly, less than half of affluent adults said it is likely that a major life event would cause them to adjust their financial plan to be more tax efficient,” Millar observes. “Of those who would be likely to make changes, the leading causes cited were health issues, followed by retirement, becoming disabled, getting divorced and having children.”

If an adviser or staffer carries the CPA designation and has a limited pool of clients, he can provide direct guidance on how they can file their taxes each year to maximize the amount of income they keep. Non-CPA advisers, on the other hand, or those with a large base of DC plan participants to serve, can partner with a third party.

This is where firms offering automated tax management solutions have come into the picture—one being Covisum, with its product Tax Clarity. As Joe Elsasser, Covisum president, describes it, Tax Clarity “focuses on the interaction between different types of income, allowing advisers to make the most effective recommendations to mass affluent clients.” The solution “gives a consumer a landscape view of retirement income taxation.”

The tool asks users to input a broad range of factors when generating a client’s tax outlook. It weighs anticipated IRA and defined contribution plan distributions, the passing through of capital gains, Social Security income, pension payments, tax-free interest and other income sources.

Given the strength of both individual investor and plan sponsor client demand, another emerging ancillary benefit beyond traditional retirement advice that growing firms may decide to explore is payroll-integrated student loan debt repayment support.

The total amount of U.S. student loan debt has topped $1.4 trillion, including nearly $75 billion in “parent PLUS loans” taken out by individuals on behalf of their kids, the panelists said. Fully 72% of workers say they have outstanding student loans or had successfully finished repaying loans while working. Nearly three in five (59%) of those ages 22 through 44 currently carry student debt, as do 21% of workers 45 and older.

In early May, student loan education, repayment and refinancing specialist CommonBond hosted a panel discussion about this “missing benefit.” All panelists agreed that both employers and employees will gain from greater uptake of student loan repayment benefits.

“The numbers show that student loan debt repayment is a universal work force challenge,” Heather Coughlin, U.S. solutions leader for financial wellness at Mercer in Boston, stressed, citing her own statistics from within the Mercer book of business. “It’s not just an issue for Millennials. We believe this will soon become a table stakes benefit for employers.”

“For workers ages 22 to 34, student debt significantly outranks retirement as the top financial concerns,” says Leigh Gross, CommonBond vice president of partnerships, in New York City. “Those without student debt had a much different perspective. Retirement and health care were cited as their biggest financial stresses, as they should be.”

Social Media and Practice Growth

Beyond expanding partnerships and standard services, advisers of all specialties are pursuing more nontraditional paths to growth. For example, financial advisers almost universally report that the use of social media has changed how they communicate with and win new clients, according to Putnam Investments’ 2018 Social Advisor Study. The research brings together the responses of more than 1,000 U.S. financial advice professionals who engage with social media platforms as part of their branding and marketing efforts.

Discussing the research results with PLANADVISER, before their publication, Mark McKenna, head of global marketing, in Boston, highlighted the fact that the vast majority (86%) of advisers using social media for business report it has helped them gain clients, up from 80% in 2016. Beyond this, the clear majority of those who gained clients (88%) report that their use of social media has changed the nature of their client relationships a “great deal” and in a number of ways.

As McKenna laid out, fully two-thirds (67%) of advisers today “find that it is easier to share information with clients thanks to social media.” Related to this, nearly six in 10 (59%) report having more frequent communication with clients overall, although 38% say they connect less frequently by phone or in person. Interestingly, the drop in phone and in-person conversations does not seem to be affecting the perceived quality of adviser-client relationships: More than half (54%) of advisers say they have a better professional relationship with their clients today than in the past, while 47% report a better personal relationship with their clients. Similarly, half (50%) report that decisionmaking is faster and easier thanks to social media connections.
McKenna emphasized that the benchmark for successful use of social media as a business tool has clearly gone up in recent years. As he noted, if advisers are using the same social media strategy this year that they did last year, they have already started to fall behind their more progressive peers.