Where to Start if You Don’t Have a Retirement Plan Yet
When it comes to retirement and planning, I’ve heard them all:
“I love what I do. I can’t imagine doing anything else.”
“I’ll never have enough money to retire, so I’ll work until I die.”
“I have no hobbies, so I might as well work.”
“I’d be bored outta my skull if I didn’t work.”
“Ha, why should I plan? Man plans, and God laughs.”
“I have children to raise and aging parents to worry about. Retirement? Ha!”
The statements go on and on, all of which recite the same underlying messages that cover important issues. As you think about your retirement plan, consider the following:
- Very few people actively devote time to consider their life in retirement. Basic questions like the “where,” “when,” “how” and “why” need to be clearly considered.
- You can’t predict the future. Unless you consider what life might hold for you, there’s no way to even quantify how much you might need to sustain your financial needs or desires.
- Retirement may not be a choice. Physical health, mental health, and the type of job and economic considerations play a significant role in your life plan.
- We are controlled by fear. Fear plays a significant role in trying to “pin down” something in the future. The sentiment here is, it’s better to do what you know than to face something for which you are untrained and untested.
- For many, their job is how they define themselves. They are Executives, Bakers, Lawyers, Plumbers, Doctors, Salesmen, Architects—their occupations become who they are. When facing retirement, that identity becomes lost; they’re just, Barbara, Sal, Mark or Felice. Their status becomes reduced, at least in their own minds.
Of course, there’s resistance to approaching the process of mapping out a period of life that could be years or decades away. Your life is immensely complicated and filled beyond capacity in the present. It seems that endless responsibilities and actions need to be taken in just one day: Work, putting dinner on the table, getting enough sleep, and maybe catching up on life’s daily tasks.
Then come the broader, but still essential life responsibilities: Addressing immediate needs of family, managing the current state of your finances, taking care of your health. And only then come the pure pleasures and rewards: Maybe getting in a vacation here or there, catching up with friends. So thinking about, what may seem like, an arbitrary time in the future, feels as untouchable as some distant solar system.
The fact is, it’s never too early to start thinking about it–just like saving for retirement; the earlier the better. When considering your retirement plan, here are some topics to consider and discuss with the stakeholders in your life:
- What are some things you’ve always dreamed of doing or being? Don’t be afraid to be creative; let it go. Write down all those ideas. Is it further education? Working in a bookstore? Writing a book? Teaching a class? Painting? Building furniture? Running a marathon? Be bold!
- Which of your goal activities or endeavors have a financial cost, and which ones are relatively dollar neutral? If your goal is to buy an island or a small nation, you might need to rethink that idea; unless that’s your driving desire. You never know what you’re going to find on eBay! Write a clear list of the expensive, less expensive, and dollar neutral items.
- What variables might derail your plans? Poor health, change in employment, severe economic decline or assumptions that are just too aggressive—the variables can be countless. It’s important, however, to consider as many as occur to you.
- What does your current lifestyle look like today and how might it change when the paycheck ends? This question leads to the idea of having a written and well-conceived financial plan that is built on conservative assumptions, realistic outcomes, and as many potential disruptions as possible.
The fact is, if you are fortunate enough to live long enough to have choices about your life, you want to be sure of the following:
- Whether or not retirement is your choice, it is vital that you’ve discovered what can give your life meaning and reason to get out of bed in the morning.
- Studies have shown that people who are active, engaged and have purpose lead healthier, happier, and longer lives.
- Being forward-thinking provides focus and incentivizes our actions today to make choices that benefit us over the whole of our lives.
We don’t know is what our futures hold. We don’t even know what the stock market is going to do tomorrow. But tomorrow always comes, and the best way to approach it is with an open mind and a willingness to tackle some of the challenges and opportunities that will provide us with the highest level of security and satisfaction.
Cyborgs Are the Future for Advisors
Becoming cyborgs is the way to go for financial advisers…blending robotics and humans into one organism.
You see, I am convinced that robo-advice models will succeed and prosper.
I am also convinced that human advisers will succeed and prosper.
I am further convinced that some of each will fail entirely and die, but in Darwinian fashion the most adaptable will survive and prosper. Smart financial advisers will work out how to become cyborgs and build an offering which is a blend of human and machine – or at least their practice will.
Despite the fear-mongering when it comes to robo’s the reality is that there are many great arguments for automated transaction systems, or robotic product delivery. Cost reduction for the consumer, cost reduction for the practitioner….efficiency, speed, convenience for all….elimination of the frustrating and time consuming service model supplied by the industry to low value transactional customers….and let’s be bluntly honest: some people DO just need a product solution at some stages of their life, and DO NOT need holistic advice at some points.
Robo-advice makes sense commercially, and it can meet a need in life stages planning for many consumers. It also happens to appeal to a segment of society who are happy to make their own decisions and transact from the comfort of their pyjamas during the ads in their evening television program, and who are unlikely to engage in full advice. It is worth remembering that this last type of consumer segment is growing at the expense of the traditional intermediated product delivery systems of distribution.
However, machines do not “manage” relationships and behaviour – humans manage humans. Humans tend to rebel against the concept (or slightest inference actually) that they are being manipulated or are at the mercy of computers and machines. Machines and automated systems exist for our convenience, don’t they? Nobody wants a “SkyNet”.
……So the human adviser remains in the equation……
When we strip out all the industry jargon and hyperbole the primary function of a financial adviser is to manage clients behaviour. We don’t really manage their money – other people do the actual money management. We don’t supply products….we source them from a supplier. What we do is manage their behaviour and expectations. We coach them. Machines don’t do that yet….and when they are able to (and they will be), most consumers will shy away from being managed by a machine.
But we cannot escape those arguments supporting robo-offerings as they make too much sense for clients and for us. In fact I suspect robo-advice will be a very good thing for smart adviser practices.
Believe it or not, I believe robo-offerings can help us get clients.
For most consumers there is a period early in life when their financial advice needs are fairly basic, and also there is a period later in life where all the planning has been done and consumers are moving into “drawdown” territory. In between those times, life gets somewhat busier and complexity increases substantially.
Advice delivered by humans should be focussed upon the complexity phase. Apart from the fact that this is the period of a consumers life when there are the most variables to consider in their planning needs, it is also the phase where behaviour management is a distinct help to the achievement of the consumers goals and objectives. Generally people will only do uncomfortable or new things if they have a high degree of trust and confidence in the person guiding them to do so, and establishing that level of trust – or the bond between two people – is where robo-offerings will struggle to compete.
However, when it comes to identifying a fairly simple need which has a product solution then robo’s will certainly be able to deliver a solution more cost effectively and faster than the human adviser can, who is bound by increasing complexity of their own called “compliance” every time they have to interact with another human being.
The smart adviser will identify those areas of their clients lives and those product solutions which work well for those times and find a transactional solution for their clients to access. They will build that transactional, no-advice, solution into the service offering that their practice puts into the market. In other words they will embrace and incorporate robo-offerings into their business model.
Not just because consumers want them or need them, and not just because it is cost effective to do so. Not even because we’d like to have a commercial revenue stream which sidesteps the more time-consuming (and therefore labour intensive and expensive) compliance requirements.
The reason smart advisers will do it is because it will help gather the next generation of clients for the firm before the complexity triggers drive them to seek advice elsewhere.
The robo-advice solution caters to those who have an identifiable need for financial services of one sort or another, but who do not yet need holistic bespoke planning. It is an entry point for consumers to become customers of the firm, and for the firm to then work upon converting those transactional customers into advised clients for the future.
Robotics are a part of our world and our future. We need to figure out how to make them a part of our business too, but in such a way that our business uses the robo’s, rather than being used by them. Humans and robo’s integrated into the same service business in order to deliver they type of solutions and assistance that consumers and customers and clients want at different stages of their life.
The future for the financial advisory practice is cyborgs.
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