When I first began my financial services career, I spent significant energy thinking about an important question. “What’s the one thing if my clients knew would cause them not to need my help?” Phrased differently, the question could be asked, “Why do people need a financial advisor?” How you answer this question will reveal the value you provide to your clients. You should consider building your business around the answer to this very important question.
As I wrestled with this question, I thought, “If clients knew when the next bull market or recession would occur, they could easily manage their own assets and wouldn’t be afraid of investing in the stock market. They could easily move to safety before a market drop and move back into growth investment right before the next bull market. They wouldn’t need my help to manage and diversify their portfolio.” It was a good start, but something was missing.
Then, I thought, “If my clients knew when they would need extra money for large, unexpected expenses, they could easily prepare in advance without any disruptions to their financial plan. Without any unknown disruptions, it would be much easier for clients to DIY their financial planning.”
While these things could reduce clients’ dependence on my help, I knew these weren’t the final answer. After further pondering, I finally answered my question with one word – time. If my clients knew their timeline, they most likely wouldn’t need me as a financial advisor. At best, my new job would look more like a financial housekeeper, cleaning up when things get out of order.
Consider this. If clients knew their timeline, they would know how long to work, how much to save, and how much to spend in retirement. The worry of outliving their resources would evaporate. The financial plan would be a simple checklist as they crossed each day off the calendar.
The good news is none of us know and most likely will never know our timeline. This is good news for financial advisors, and it’s probably a good thing for our clients. Even though financial decisions would be much easier if time were known, it would likely be depressing counting down the days.
From a financial standpoint, time is something you either end up having too much or not enough of. So how can you build a financial plan that addresses the issue of unknown time? Some advisors may say unknown time can be solved by acquiring a large investment account and managing withdrawals for a longer than expected timeline.
While this can work, it often leads to clients spending less money in retirement and experiencing a rollercoaster of emotions during market downturns.
In my opinion, financial advisors should take another approach. We should consider strategies designed to solve time financially, regardless of whether the timeline is shorter or longer than expected. Such strategies would need to give clients confidence to spend during periods of market volatility, with the aim of avoiding the emotional rollercoaster.
The solution is to implement actuarial-based financial products as part of the financial plan. No one knows time like an actuary. The actuary’s job is to predict your timeline. If they happen to be wrong, the company offering the product guarantees to provide the benefits promised when you purchased the product.
Time-solving financial products are packaged as life insurance and income annuities. A life insurance plan offers clients in retirement the confidence to spend, knowing their financial plan will be replenished for their surviving spouse. Many life insurance products today also allow access to the death benefit to pay for long-term care health expenses to avoid depleting investment accounts. But what if a client lives a healthier, longer-than- expected life? This can be solved by implementing an income annuity for a portion of your client’s retirement income. An income annuity offers the opposite benefits of life insurance.
Instead of a large lump sum of money at a specific time, income annuities offer incremental deposits that stop when a client’s risk of time has expired. By pairing them together, you potentially solve the problem of having too much or too little time financially.
My hope is you take a moment to consider how you solve your client’s unknown timeline. I’ve found that clients are willing to discuss this topic more than many advisors think. In my experience working with investment-focused advisors, life insurance and income annuity client conversations are avoided because the advisor doesn’t want to be perceived as a salesperson. I believe advisors can have time-solving conversations by asking for clients’ permission to discuss the topic. If you prudently navigate how time can be solved by implementing products engineered to solve time, clients should walk away with more confidence in their plan without the feeling of being sold.
If you would like help implementing time-solving client conversations in your business, please contact me using the information below.
Josh Curtis, Managing Member, Gestalt Financial Group 402-436-2596