Clients Are 'Overwhelmed' By Retirement Planning, Jackson National Says

Even though advisors might be preparing their clients to save money for retirement, a new study has found there are a lot of hidden risks they have not been as successful in preparing their clients for. In addition, the study by Jackson National Life Insurance found that many clients find the process of preparing for retirement to be overwhelming.

In many instances, when advisors speak to clients about retirement and the risks, they do so in either a single meeting or over a series of meetings where retirement is the sole topic, the study said. This format becomes too much for clients, according to Glen Franklin, assistant vice president of research, RIA and lead generation strategy at Jackson.

There are several risks associated with retirement, he said. One has to do with financial mishaps that may occur such as medical problems, repairs to a house, or other emergencies. Others are more emotional, according to Franklin. These reflect the emotional aspect of how a person plans to spend retirement including if they plan to work or not.

In talks with clients, advisors will group these risks together, Franklin said. Investors prefer that advisors break these meetings up and deal with each risk one at a time, the study found. 

“We know retirement isn’t coming for quite a while so maybe we space [the planning discussion] out over the course of a year or more so we are giving people time to digest and really evaluate each of the major risks in retirement and come up with an effective plan to deal with it,” Franklin said. “The advisors can integrate those into a cohesive plan.”

Investors were also concerned about their emergency funds. The standard emergency fund is saving up three months’ salary for those who are working. In retirement, it works differently. Advisors need to tailor a client’s emergency fund plan to the specific needs of their client, who are dealing with a finite amount of money, Franklin said. No one has adequate resources to prepare for all emergencies.

“[Advisors] aren’t giving [investors] clarity on where to place their bets for their individual circumstances and they would like additional help around that,” Franklin said. “They just can’t throw everything at every risk [and] you don’t want to park a huge amount of money in cash where it’s going to be eroded by inflation.”

The responsibilities of a financial advisor are expanding and no longer just include investment management. They have become more holistic and entail planning for the future including, college, retirement, and even estate planning. There is also a certain level of emotional support advisors must provide for their clients, Franklin said.

They do not necessarily need to become therapists, but advisors have to understand the emotional impacts of their client’s financial decisions. For instance, they need to prepare for what retirement will look like including how a person plans to spend a day in retirement if they are not working. 

“You want to be very satisfied in retirement because you have this block of time, where you don’t have purpose anymore, you don’t have structure to your day, you don’t have a productive output to give yourself a sense of value and worth,” Franklin said. “Advisors can speak to that stuff without getting into the emotional issues that a therapist would.”

Retirees and pre-retirees have a more realistic expectation about their finances once they get into retirement, the study found. They no longer fear that they will wake up one day and not have any money in their accounts. Instead, they understand that the reality is that their funds will dry up over time, Franklin pointed out.

“What’s more realistic is its going to be a slow degradation of their lifestyle,” he said. “It’s not about having the money, it’s about not having the things that the money affords you, which is a satisfying lifestyle in retirement.” 

This latest analysis by Jackson was a follow-up qualitative study to a more quantitative one it published last year, Franklin said. A third-party on behalf of Jackson conducted interviews with four pre-retirees, two retirees and two advisors. Those interviewed were randomly selected and participated in Jackson’s earlier study.

The participants had to be on track to retire with $250,000 in assets or have retired with a minimum of that amount. The advisors needed to be a member of a registered investor advisory firm and have at least 75 clients, according to Franklin.