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and
By Steven Wallman
CEO
The Future of Financial Planning
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We’ve All Heard “The Numbers About the Future”
But to remind us:75 million people (Baby Boomers)
will be approaching retirement over the next 25 years
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20.00%Male Population -Age 65-84
Female Population- Age 65-84
Male - Age 65-84
Female - Age 65-84
Growth in Retirement Population (Age 65-84)
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Male Population - Age 85+
Female Population - Age 85+
Male - Age 85+
Female - Age 85+
Growth in Retirement Population Over Age 85
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But, Older Age and Retirement -- Is Not the Same as It Was
• Not only is life expectancy getting longer, it’s getting longer faster– So expectations about getting older need to be reset more
swiftly• Older Americans are also healthier
– No longer does retiring at age 65 hold the promise of only a few more good years
– now it’s 20 -25 years instead of 10 -15, as it was as recent as 1980
– It holds the promise of a second career, of extensive travel, of continued vitality, and continued expense
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And End Of Life Costs…
• Are accelerating as medical technology gets far better -- and far more expensive– Over one-quarter of total Medicare outlays are for care in
the last year of life – and this has been unchanged over the last 20 years
– More importantly, an individual’s medical expenditures in the last year of life are just under the annual median income for a U.S. family of four
– And overall, all spending on medical costs keeps rising• from over 15.4% of GDP in 2004, • growing to 18.7% of GDP in ten years
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The Implications Obviously Are Enormous
• One-third of Americans appear to be on track for a reasonable retirement
• About a third more are, at best, playing catch-up– they can reduce expenses and lifestyle enough, and work
longer, to retire about as they would like– but they have to make those changes– will they?
• And a third are so far behind today that Social Security or friends and family are likely to be their only saviors– almost nothing they do will let them catch up
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Does Anyone Care?
• Obviously, we all do – • But what are we doing about it?
– Governments debate how best to encourage savings
– Employers seek ways to assist– Financial services firms advertise products and
services– And future retirees fret
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The Role of Government
• This is clearly a societal concern -- effecting all of us -- and having impact as to political policy making and social stability
• It goes to the core of what kind of a society we want to be
• But what can government do?
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Employers
• There was a time when employers might have been expected to assist – or unions
• In 1985, almost 80% of all full-time workers were covered by a defined benefit plan
• Today, it’s closer to a third• Employers know the need is great
– they would like to help– but it’s not their core business
• And they have turned to DC plans because of lower responsibility and liability– that will not change unless the law does
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Financial Services Firms
• The old adage is “securities are sold not bought”• Prospective retirees who see their future at risk are
wary of trusting their broker – the default financial advisor
• More easily accessed/trusted financial firms – banks and insurers – are not seen as experts
• Firms are perceived to exist to sell products and services
• Not to assist and help as honest problem solvers finding the best solution
• But what/who else is there?
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And So, Individuals Fret Over Their Own Retirement Planning Considerations
• Income• Accumulation & Growth• Risk Management• Tax Considerations• Estate and Planning Considerations• Flexibility • Complexity• Uncertainty, and all leads to• Worry
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What Can Be Done To Help?• Technology will help some
– The Internet provides an historic means to distribute information
– It’s inexpensive, it’s interactive, it’s pervasive• The pressure of the baby boomers will force
markets, firms, governments and others to provide some response
• But there needs to be a new professional that provides – leadership, assistance and advice
• In an – objective, – unbiased and – conflict-free manner
• To help people think about their future
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This Needs A Broad Approach
• There is a real, and excruciatingly important, need to assist and provide help
• There is a need for a professional to pull together a number of different disciplines, and interact with the professionals in each– Medical– Legal– Insurance– Accounting– Spiritual, as well as– Investment and other Financial
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It Requires
• Considering the total picture• Realizing today’s investor is more
knowledgeable and more involved• Revising assumptions about what a retiree
will look like• Revising assumptions about how to meet
their needs
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Adapting to The Needs of The Market
• A percentage of the “retirement wave” will meet the traditional high net worth/advised client profile
• But many will not– Those that do not still need help/advice, and
many will be willing to pay some for it– Can advisors and providers adapt their
business models to meet the needs of this group?
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The Financial Planner Is In The Best Position To Lead
• Doctors are highly focused on their profession and its complexities
• Lawyers are too focused on specific planning needs related to taxes and estates
• Spiritual leaders are not trained in this arena• Brokers sell products – and they can adapt – but
will they?• Financial planners are the best candidates
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The Financial Planner As “The Future Planner”
• The job requires depth -- and breadth• The CFP® certificant could add significant
value by ensuring the ability of a professional who provides advice regarding future planning
• In concept, a “Certified Future Planner”
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Expectations
• Assist clients in taking inventory– Housing– Healthcare– Lifestyle– Estate Planning– Etc.
• Assess needs• Manage the transition
– Rollovers and Distributions– Tax Consequences– What to do with the money– How to understand if it is enough
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Solutions
• Manage to the needs of the client– Unified Approach– Transparency
• Fees• Investments
– Increased Diversity of Investment Selection• Managed Accounts• Annuities• Alternative Investments• Reverse Mortgage• Etc.
– Holistic advice encompassing the client’s whole life
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Solutions
• Team Approach– CFP® professional as “team leader”– Involve other “expert” professionals
• Investment Management• Healthcare• Insurance• Attorney• CPA
• Technology – Enables this new approach– Tech friendly clients– Fee compression
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Conclusion
• Greater retirement – future -- planning need than ever before
• Retirement needs to be redefined
• Is this an industry prepared to meet the needs of the market?
• There’s a need for a Certified Future Planner that can really, finally, bring this all together
• Who can rise to this challenge?