Typically, meetings with new clients — or even existing ones — to discuss their retirement goals are fraught with tough questions that can overwhelm them, preventing them from making decisions and taking action.
“When you talk about asset accumulation, people are more willing to give up control because it is something in the distant future,” said Peter Geismar, head of Confident Choice, a firm that helps financial services companies bridge the gap between what consumers want from retirement income and what providers are offering.
But as retirement approaches, the distant future becomes an impending reality. Clients' fear and uncertainty increases as their time horizon shrinks, said Mr. Geismar, who has more than 20 years of experience in financial services designing ways to make complex products, ideas and services more relevant to consumers.
Throw in the need for crucial decisions on some complex issues and you have a recipe for analysis paralysis, he said during a recent webinar where he discussed the behavioral perspective of pre-retirees.
The standard industry approach to an initial conversation about retirement is to ask clients about their assets, their assumptions (such as when they plan to retire) and their goals.
But what may seem like straightforward questions to an adviser can be overwhelming to consumers. When people start a financial conversation with decreased confidence and a perceived loss of control, they often resist suggested solutions or postpone taking action, Mr. Geismar said.
A better approach is to frame the process positively and start small. “Too much choice is overwhelming and people don't make good decisions when faced with that,” Mr. Geismar said.
“Consumers want to know that there are reasonable and achievable solutions,” he said. “Hard choices — such as potential lifestyle changes and tough trade-offs — become acceptable if they are within the consumer's control,” Mr. Geismar noted during the webcast sponsored by the Retirement Income Industry Association.
The next step is to try to uncover clients' needs and help them prioritize their goals such as asking which is more important: asset growth or guaranteed income?
Look for clues about their emotional views about their finances, he said. This goes beyond their investment risk tolerance. It's about what allows them to sleep at night.
Restate their answers to let them know you have been actively listening. Explain how their answers, needs and financial circumstances suggest certain types of investments may be more applicable than others.
At a high level, describe the range of possible retirement income options — not products — that may be applicable to the individual. This option becomes a starting place for making adjustments to products and asset allocations.
Finally, be ready to pivot. This process is about reinforcing the client's sense of confidence and control, Mr. Geismar said. Their needs are going to evolve. Assure them you will be there throughout their journey. Such ongoing support builds confidence and establishes you as a trusted adviser.
He summed up his six steps to improve outcomes with pre-retirees: Engage with the client's emotions; build their confidence in their decisions; enhance the client's sense of control; motivate action; create a closer alignment between provider and client; and engender trust.
“The real benefit of adopting this approach is you wind up with clients who want to work with you rather than prospective clients who don't,” he said.
During a phone conversation after the webinar, Mr. Geismar told me that one of the best ways for advisers to engender trust is to offer free information and education about important retirement income topics, such Social Security claiming strategies. “If you give useful information to consumers for free, they are more willing to trust you,” he said.
David Leland, a Merrill Lynch financial adviser, couldn't agree more. With more than 30 years of industry experience, Mr. Leland said he became convinced that making the wrong Social Security claiming decision, particularly for married couples, could be far more costly in retirement than making the wrong investment decision.
For the past year, Mr. Leland and his 12-person team have been highlighting the value of savvy Social Security claiming strategies as part of their initial retirement income planning meetings. “Using Social Security income illustrations is winning us business and separating us from the competition,” Mr. Leland told me. “When someone comes into our conference room, our close rate is 90%.”
Mr. Leland's growing Social Security expertise is part of the Merrill Lynch Clear approach to helping clients navigate to and through retirement. The framework explores distinct life priorities — including health, home, family, finance, giving and leisure — that connect the financial aspects of life in retirement.
Mr. Leland said he expects those Social Security conversations will be responsible for an additional $50 million in new business this year, on top of his firm's existing $1.5 billion in assets under management.
(Questions about Social Security? Find the answers in my ebook.)
