4 Workflows for a More Efficient Financial Planning Process
The process of financial planning can be complex, involving many client touchpoints, numerous document transfers, and unique needs for each… Read More
Insights and best practices for successful financial planning engagement
• Joe Buhrmann • April 12, 2022
‘How much do I need to save for retirement?’ is the primary question that often spurs people to take a longer-term, more holistic view of their finances. While many understand the significance of retirement planning, when the necessity trails from spending today’s dollars to managing tomorrow’s money, a lack of expertise and skill can lead to indecision or inaction.
According to a Fidelity Investments State of Retirement Planning Study, which spoke to a national sample of over 1,000 adults who are not yet retired, just 25 percent of respondents accurately identified the expert recommendation to have 10-12 times your last full year of working income saved by the time you reach retirement.1
Financial professionals who can quickly address retirement readiness to prospects and existing clients have an opportunity to engage this audience and highlight value in both retirement and broader financial planning.
Time and time again—across all facets of life—we see examples of how preparation and planning leads to better outcomes. Interestingly, the State of Retirement Planning Study found that those who approach retirement with a blueprint or a plan in place have greater peace of mind that they’ll weather market volatility, and are more confident that they’ll be able to retire when and how they want to.1
To help those in need, you want to achieve a straightforward understanding that the client’s planning situation will fall under the following actions: saving more, spending less, or retiring later.
Developing a picture of both the client’s base needs and the resources they have available will quickly show how they work together. And it will also reveal whether the outlook can be improved. For the quick financial plan, you can keep data inputs to a minimum to at least obtain the 15,000-foot view for the client:
Further evaluating options around the retirement goal will require the financial professional to make several assumptions about how to align the desired retirement age with the desired lifestyle.
While income history can be used as a predictive measure to gain insight around future needs, there is often more to uncover about by the client’s expectations for their retirement, such as access to family or community, or top-quality health care. Discussion around different lifestyle choices helps to explore a broad array of circumstances surrounding the client’s financial life and their values.
Modeling these different scenarios within planning software can be extremely helpful to produce comparisons and tradeoffs. A visual representation of success, or a “plan score”, can effectively convey to clients whether their needs are fully funded, prompting action where necessary.
These additional data points provide a great opportunity to make the retirement conversation inspirational: What can retirement look and feel like to the client, and what matters along the way?
To build upon the financial confidence that accompanies a plan, it’s essential to discuss plan assumptions and the accompanying factors that could disrupt those. In this way financial professionals help clients better understand the areas that can impact their plan success.
For example, how do taxes, medical costs, inflation, and expected benefits from Social Security influence clients’ retirement needs? While it’s true that the Full Retirement Age (FRA) has changed over the years and needs to be confirmed against your birth year, just 17 percent of respondents in the retirement planning study correctly identified their FRA.1
Financial professionals should set expectations around what assumptions—capital market returns, Social Security benefits, inflation, and tax rates—have been built into the plan. When clients understand these factors alongside their needs and resources, then they will have a better grasp on how their activities or decisions could put the plan at risk.
In addition, keeping clients informed with regular updates about the broader regulatory, market, and societal effects that could shape their retirement plan keeps them engaged with the plan and its expected outcomes.
There’s no question, with retirement a high priority for so many, the time is right to start the planning conversation. And while people are living longer, in many cases today the pre-retirement situation is also becoming more dynamic. People may have more than one retirement account, and a mix of assets and investment vehicles to help them save.
Planning software can be a useful tool to help financial professionals start the planning discussion, to construct a financial plan, and to help maintain an ongoing narrative to optimize the plan.
For more information on planning software and the efficiencies you can gain during the planning process, watch the presentation below to see how a technology-based financial planning structure can enhance engagement, improve the overall client experience, and drive growth within your practice.
Source:
1 Fidelity Investments, “State of Retirement Planning Study,” 5-12 February 2021, n=1,204.
DISCLAIMER
The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.
You may also be interested in...
The process of financial planning can be complex, involving many client touchpoints, numerous document transfers, and unique needs for each… Read More
Episode Summary How can you help clients find the right balance of saving for the future while enjoying their hard-earned… Read More
Technology has become an essential part of the financial services industry. As a result, the financial technology investment firms must… Read More
Download our latest eBook and learn how top advisors are combining Fintech and FinPsych for superior client outcomes.
Download Nowa new source of expert insights for
financial professionals.Get StartedTips specific to the eMoney platform can be found in
the eMoney application, under Help, eMoney Advisor Blog.