The Blind Spot
The Blind Spot
Clients want outcomes, right? And financial advisors deliver those outcomes, usually in the form of numbers. And, while proving results with data is standard, it also creates a blind spot for many financial professionals.
The real gap isn’t between assets and liabilities or income and withdrawal rates — it’s the client’s confidence gap. And that gap is widening.
Clients are looking for more than numbers. They are looking for a plan.
The Current Client Philosophy
A recent study revealed a confidence gap that must be addressed by financial professionals. Consider these telling results:
·Less than half (48%)1,2 of Americans have a formal written plan, which increases anxiety during market volatility. Given today’s demographics, it’s surprising how many advisors still tell us they don’t do income planning. Not having a plan reflects a lack of focus on the client’s future needs.
·A large majority (68%)1,2 believe their personal finances lag market highs. This is troubling because a client’s portfolio should not mirror the market—it should align with their asset and income goals. This misalignment is often another symptom of not having a written income plan.
·Many Americans lack the discipline to remain invested during market dips. Overall, 34% withdrew money during downturns to avoid further losses.2 Millennials did so at an even higher rate of 46%.2 While many advisors believe their clients are well-educated, it’s clear we still haven’t addressed the emotional concerns that drive irrational reactions.
·The fear of running out of money continues to grow. In 2022, 57% of Americans feared running out of money more than death.1,2 Despite the negative environment at the time—COVID-19 aftershocks, rising interest rates, escalating mortgage costs, and economic uncertainty—that number has now risen to 67%.
Think about that for a moment. Two-thirds of the country fear they may run out of money. They don’t have anyone actively planning around their biggest fear. Where will they turn?
To another advisor.
How to Retain Peak 65 Clients
If 67% of Americans are unsure whether they will outlive their income, the industry must acknowledge that we are failing them. Much of this uncertainty stems from not having a plan. To change client confidence, we must change our behaviors.
Consider these six straightforward changes that can have a huge impact on your clients’ confidence levels.
Regular Reviews
Create an environment where clients expect regular portfolio reviews and retirement income projections. Consistency builds confidence.
Become a Better Storyteller
Use anecdotes and empathetic stories to surface client concerns. Understanding those concerns helps identify root causes and allows you to address them effectively.
Risk Tolerance and Behavioral Audits
Risk tolerance changes over time, but so do behaviors. Use reviews to measure both. Ask clients how they would react to a 20% market drop — or a 20% gain. Help them understand whether their annualized return is good, bad or on target.
Think Transformational, Not Transactional
Transformation begins with deeper discovery, better questions and a written income plan. Help clients envision their future selves — the better version they aspire to become. The planner who helps clients reach that version will win the day.
Understand How People Make Decisions
Early in my career, I presented the way I preferred to buy. I didn’t see real success until I understood how each individual wanted to learn, buy and be advised. Know your own style and the client’s style to influence outcomes more effectively.
Manage Risks, Not Just Assets
Over the next 25 years, I believe advisors will be compensated more for managing retirement risks than for managing assets. Healthcare costs remain a major concern. Longevity amplifies every retirement risk. Taxes are likely to rise due to national debt, and $48 trillion in qualified funds will transfer to the next generation with tax consequences.
With so much uncertainty, financial professionals have an enormous opportunity to make a meaningful difference. It starts with new behaviors — ones that may feel uncomfortable because they differ from past practices. But these changes will ultimately improve the outcome: higher confidence for the American retiree.
What to Do Next
When a gap or blind spot is this wide, it cannot be solved with a single change. Progress happens one step at a time.
Here are five steps to help grow your business during one of the greatest wealth transfers in U.S. history.
1.Keep the Client as the Hero
Many advisors position themselves as the hero in their marketing. But the client is the hero of their own story. Begin with them at the center. This focus enables better discovery, uncovers hidden anxieties and strengthens the relationship.
2.Plan –Income Plan
If you want to differentiate yourself, create a written income plan. Most clients don’t have one, yet all want to know they won’t outlive their income or assets. Addressing this fear wins business.
3.Address Longevity Risks
Tackle the full spectrum of retirement risks from healthcare to income to taxes to legacy planning. None can be ignored; all must be mitigated.
4.Create a Review Schedule
Start with your top clients and schedule regular reviews. Discuss both the assets you manage and the assets held elsewhere. The average American has accounts at up to seven institutions. Coordinating those assets increases confidence.
5.Upgrade When Appropriate
Take advantage of today’s interest rates and payout levels by replacing outdated contracts when it improves the client’s overall outcome. A written plan helps determine when upgrades make sense.
These five steps begin the shift from transactional to transformational — and position your practice for long-term growth. They are easy to implement, and your clients will have positive reactions to the changes. Small steps like these hold the key to change the trajectory of client fear into one of confidence.
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