WITH THE NEW NORMAL OF 24/7 connectivity and rapid-fire automated investment analysis, not to mention recent high-stress events (looking at you, global pandemic), clients are expecting ever more of their financial advisors. It’s no longer enough to simply draft a financial plan and send your client along. There are robo advisors for that. To stand apart in an increasingly tech-enabled industry, financial advisors must address investors’ broader and more complex needs, such as with longevity planning.
We spoke with John Diehl, senior vice president of applied insights at Hartford Funds, who recently gave a presentation at the Schwab IMPACT 2020 conference with Joseph Coughlin, founder and director of the Massachusetts Institute of Technology’s AgeLab, on how longevity planning is the new advisory value.
Here are edited excerpts from that interview.
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Why should advisors focus on longevity planning?
As technology has impacted the world of financial advice, it is now possible to get an asset allocation model or even a basic financial plan through technology means but on a simplified basis. When we talk about longevity planning, we’re talking about more complex systems that oftentimes are more tangled and more comprehensive, and have multiple solutions that need to be vetted. So it’s an area where clients most valuable advice, and more insight than advice in guiding them to the proper solutions.
Longevity planning starts with an emotional opportunity or challenges that the client is dealing with and the financial planning piece comes secondarily. So it’s first a problem or hope or a long-term objective that is important to the client. The client is often not able to express their concern or challenge in financial terms. Many times advisors assume the client walks into their office hoping for a financial solution, and what they really need first is for someone to understand the situation, then provide a solution or a range of solutions. We have to be careful not to jump to the solution before we give the client a chance to express the issue or opportunity.
How has the pandemic changed the longevity planning landscape?
One of the challenges with extended longevity is what we are going to do to stay socially engaged for the next 20 or 30 years of our lives. How do we make sure that we don’t experience isolation and loneliness as part of that longevity situation? Well, the pandemic gave us all, regardless of our age or station in life, the chance to experience what it might be like if we didn’t plan for that effect.
Another area related to lifestyle and longevity is technology adoption. We’ve seen a rapid uptick in technology adoption by clients. They’re buying everything from smart devices to ring doorbells to Amazon’s Echo Dots. That’s because technology enabled them to access things that they couldn’t have previously accessed.
[Read: Schwab Independent Advisor Outlook Study: The Future of the RIA Industry.]
So in a similar way advisors have had to adopt new technologies — Zoom conferences and WebEx meetings and other means of client interaction. But most people agree that on the other side of the pandemic, they don’t’ see this tech piece going away.
What are the adjacent needs of longevity planning?
An adjacent need that you might uncover as a result of the pandemic is a client’s lack of access to needed services like medical or groceries. As an advisor, you may have helped other clients with similar needs. Part of the answer might be a technology solution; it may be something that might be addressed through telemedicine or an online delivery service. Perhaps they will need to relocate at some point because the location of their home makes it near impossible to access what they need.
Many advisors may not consider the need for access to be a primary objective of the financial plan. But the client who is stressed because they can’t get to the things they need — unable to drive, lack of outlets — may find great relief in having a conversation and hearing insights as to how others have dealt with the challenge. It may also result in financial implications to be incorporated into the plan.
Another example of adjacency would be the role clients play in their family structures. Are they going to be providing care for loved ones or are they going to be needing care of some type? What’s the financial dynamic? From the client’s perspective, financial implications may not be the first thing that comes to mind. From the advisor’s perspective, the client’s role within the family structure will reveal adjacent needs that will need to be addressed in the financial plan, such as the need to plan for specific caregiving services or the source of replacement income if a client needs to reduce time at work to care for a loved one.
[Read: Liz Ann Sonders — Stock Market Outlook for Q4 and 2021.]
The adjacent needs are often thought of as secondary in the financial conversation but are primarily in terms of a client’s emotional concerns. It is often the adjacent needs that spur the necessity of a financial conversation.
How can advisors adapt their value proposition to look beyond financial planning?
Financial professionals need to expand their centers of influence beyond those who are directly financially connected like accountants and estate attorneys. Perhaps the financial advisor can build relationships with other professionals, like someone skilled in caring for patients with dementia or memory care issues. Perhaps it means building a relationship with a home contractor who specializes in adapting or modifying homes for aging occupants.
It’s expanding the circle of influence so that if the advisors themselves aren’t experts in a given area, perhaps there’s someone in their network who is. They become a connector of resources.
What do you think the future of longevity planning looks like?
If you think about the past, we looked to the financial professional to be the numbers or market expert. It’s much more personal now. It’s more emotional and more therapeutic in a way. The advisor is still expected to bring their knowledge of financial instruments and financial planning, but the opportunity exists to differentiate in the area of identifying adjacent needs and connecting clients with resources that can help.
The world doesn’t end with the creation of a financial plan. Our engagements are a continuous conversation: new challenges and opportunities and demonstrating how that plan can be flexible to fit an extended life expectancy and changing needs over time.
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Q&A: John Diehl of Hartford Funds on Longevity Planning originally appeared on usnews.com
