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A  Different Kind Of Advice

A Different Kind Of Advice

June 26, 2018
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A recent Wall Street Journal analysis found the generation of Americans that are just reaching retirement today age is in worse financial shape than the previous generation. The Journal estimates more than 40% of Americans aged 55-70 don’t have sufficient resources to maintain their current standard of living in retirement.

What happened? The Journal report suggests factors such as over-reliance on 401(k) plans, increasing health care costs and higher use of debt may be to blame. Ironically, this is the generation whose working years coincided with the growth of the financial planning industry. With access to more professionals and more expertise, how can it be that this generation is heading into retirement in worse financial shape than their parents? I would suggest that our industry has been focusing on the wrong kind of advice.

Much of our industry is focused on product-based, transactional sales. “Buy this fund. Refinance this loan. Let us manage your portfolio.” Much of the traditional financial planning industry uses needs-based planning: Let’s take an educated guess at how much you might “need” in retirement (strike one), assume a rate of return (strike two) and use a linear math equation to calculate how much you need to save to reach your goal (strike three). The math makes the process seem scientific, but it doesn’t seem to be working. I would suggest that the financial failure of this generation reflects the failure of needs-based planning.

What’s needed is advice on how to manage cash flow. How do you put the systems and processes in place to save more in the future? The numbers are astounding. A 1% shift in savings over time can mean $500,000 to $1 million more in retirement assuming zero rate of return(!) This is the kind of advice that today’s generation of working adults sorely needs.

This is what sets our firm apart as advisors.