The Road Ahead?

As you consider your future, you might have realized that retirement is not what it used to be. Or it may not be what you hoped it was going to be.  Or what you thought you wanted it to be may have changed. But how much control do we have anyway?  Our lives are filled with unexpected events and changes that may direct us to a different place. And then maybe back again.  Some people get to retirement without much of an idea of how this new chapter will unfold – others are clear on what they want to do with their future.

What are the possibilities?  What about the 100 year old marathon runner?  An amazing story!  In a recent survey, 95% of people over 65 said that they do not feel old.  The average baby boomer feels 10 years younger than their age.  Also, 70% of prospective retirees expect to work in retirement and more than 50% of those are interested in a new line of work.

Over the years, I have worked with and met several people that continue to move forward later in their life.  They are still looking for growth and challenges; new contacts and new ideas.  Consider some things you would like to accomplish – even if they are modest.  As a financial advisor, I help my clients understand what expectations are realistic and how they may need to adapt in the future.  We try and match what they want to do with what they can do.

Even if you are not quite where you want to be financially (or not even close), it is important to consider how you will spend your time as you move into retirement. We are living longer than at any point in history.  With this increased longevity, you might be fortunate enough to have the flexibility to do things you had not been able to do – to get closer to living life on your terms.  And don’t overlook the role of work in your future.  I will discuss this in later posts.  This presentation by Ken Dychtwald is an interesting and compelling discussion of why retirement means different things to people.

Financial Industry Speak (Part 2)

Does this sound like anything you might have heard?  “We offer the most comprehensive approach in a new paradigm of total portfolio management.  So you don’t have to, we continuously monitor the markets 24/7, using a disciplined rigorous approach and employing dynamic tactical asset management strategies for your benefit, while also bringing strategic asset allocation management to bear on the process.  Our holistic approach relies on top notch research and experienced experts to identify market inefficiencies and capitalize on hard to identify trends.  This is how we deliver amplified risk adjusted returns within a given risk parity framework.  Our forward looking research and due diligence using proprietary modeling maximizes wealth enhancement.”

In case it is not obvious, I made this up.  I am having some fun with how I believe the financial services industry describes the guidance and advice it provides to consumers.  But does this sound a bit like how some firms promote their services?  This would have to be expensive, right?  As you work with your advisor, or the the investment firm that manages your money, I would encourage you to challenge them to explain, in a way you can understand, how they invest and manage your money.  It is your responsibility to verify that you are getting good value for your dollar.  Don’t be fooled by terminology that sounds smart but may not mean much of anything.  One of the quotes on my site is “Everything should be made as simple as possible, but not simpler,” by Albert Einstein.

Financial Industry Speak (Part 1)

Do you understand what your advisor tells you?  Or what you hear in the financial press?  Really?  Or do you just nod your head when they start to use terms or phrases that you are not familiar with just so you can move the conversation along?  Do you start to tune out?

Do you ever wonder if they are talking this way intentionally to sound impressive – to imply that the whole investment process is far more complicated than you could ever understand and you need their highly paid team of experts to figure this whole thing out for you?  Has this occurred to you?

A few years ago, at a district meeting for my prior firm, my manager said to occasionally use words that your clients may not fully understand to create the illusion of complexity.  If that is not bad enough, many years ago, my then manager suggested that I recommend increasing my clients’ international holdings and come up with some reason why this is a good for them.  In his words, “they won’t know any difference.”

I never took their advice, but I didn’t quit either.  Well, eventually I did quit – to set up PlanVision.   Now, my primary objective is to provide education and guidance to my individual and plan sponsor clients because they pay me to do it – not because an investment firm pays me.  It is much better for them – and liberating for me!  The next post will provide some examples of Industry Speak.

Clarity on Fees and Their Impact (Part 2)

For plan sponsors, accepting the status quo on plan fees can have consequences on your employees’ future.  You have options from low-cost index funds to more expensive actively management choices. And unless the more expensive choices you offer perform better to offset their higher management, consulting, insurance, and/or sales fees, the impact is that your employees will earn less in their investments and will accumulate less in their accounts, all other things being equal.

The consequences of your evaluations are real and meaningful.  Quite simply, your employees’ may have to work longer, work part-time in retirement, or accept a lower standard of living in the future. Maybe some of your employees would have done that anyway – however, aren’t most of your employees hoping for financial flexibility in their future?

Imagine what would occur if, by virtue of some poor management decision, all employees at your employer received an across the board pay cut of 5 to 15%? How would that go over?

So, unless you can justify the additional management and other miscellaneous costs – meaning they provide value for what you and your employees’ pay for them – we believe you are much better off providing your employees an array of low-cost index funds.  This gives them the best chance to get as close as they can, over the long run, to reaching financial independence.