Tag Archive for: retirement

Help your downsizing clients create their legacy

Many investment and financial advisors have older clients who struggle with decluttering as they prepare to downsize. I picked up some useful ideas from a session presented by Matt Paxton, the host of the PBS program Legacy List and the author of a book that had the same title as his presentation, Keep the Memories, Lose the Stuff: Declutter, Downsize, and Move Forward with Your Life.

We hold onto things because of the people and the emotions attached to those items, said Paxton. We can’t let go because we love those people and the memories. However, there’s a way to let go of those things while keeping the memories. Paxton said that if you tell their stories, their memory doesn’t die. (However, satisfaction from this process may be hard for some people. An audience member pointed out that not everyone has fond memories of the people in their lives.)

Below is a five-step process suggested by Paxton.

Step 1: Know your finish line. 

Know where you are going and your “why.” In Paxton’s case, he wants to be a grandpa, which drives his decluttering. 

Write down the real reasons you’re downsizing and put them on the wall everywhere to remind you of your goal.

Step 2: Start small.

Declutter 10 minutes a night for the first two months, then move up to 30 minutes a night. In the first two months, you’re proving to yourself that you can get it done. 

Start in a non-emotional area, such as a junk drawer, suggested Paxton. Emphasize “Look at how much did get done” instead of how much is left to do.

Step 3: Focus on your legacy.

Write down a “legacy list” of the top five items in your house. What would you take with you if your house caught fire? 

Step 4: Tell the stories.

Tell stories about your top five items. Sharing your stories speeds up the process of letting go of things. The story is the legacy, not the item. Find someone to tell the story to. Your audience could be friends or members of your community—not just family members.

Paxton uses an app called artifcts.com to record stories of items. When you record your stories, don’t get stuck on the details. It doesn’t need to be perfect. Include:

  • What is it?
  • How did you get it? Who gave it to you?
  • What do you remember about that day? What smells and sounds do you remember?
  • Why is this item important?

Step 5: Donate.

Paxton recommended donating rather than selling because sales rarely make enough money to make you happy. He estimated that you might receive maybe only 10% of an object’s value.

Paxton said that it’s also helpful to think about “What if someone else needs this now more than I do?” That works for me. I’ve felt touched by the delight with which some Buy Nothing group members have received some of my discards.

Guilt is a huge part of downsizing, Paxton said. But it’s “wasted energy” and represents your brain holding you back from doing the right thing, he added.

You can learn more about Paxton at iammattpaxton.com.


I hope these steps help your clients—and maybe even you—declutter and create a legacy.



Disclosure: If you click on an Amazon link in this post and then buy something, I will receive a small commission. I provide links to books only when I believe they have value for my readers.

RIAs with DC assets are in demand by fund companies

Registered investment advisors (RIAs), if you control significant defined contribution (DC) assets, then mutual fund companies are hungry for your business and will do whatever they can to accommodate you. That’s the message I took away from “The 2010 Distribution Landscape,” at panel at the NICSA East Coast Conference on Jan. 14. The panel, which was moderated by Matthew Bienfang of TowerGroup, included Catherine Saunders of Putnam Investments, Daniel Steele of BNY Mellon Asset Management/Dreyfus Investments, and Bill Taylor of Pioneer Investments.

DC plan assets offer mutual funds very attractive profit margins and RIAs are a significant source of growth in this arena, according to Bienfang. For example, defined contribution investment-only margins average 25% vs. about 17% for retail and 15% for SMA (separately managed account) assets. 

Bienfang stressed that fund firms need to sell to RIAs as if they were institutions rather than individual investors. Fund firms must also ask RIAs how they can help them grow and manage their businesses. Then Bienfang asked his panelists to talk about how they’re targeting RIAs with DC assets.

BNY Mellon: Game changer is coming 
Once IRS Form 5500 requires the disclosure of advisor compensation for retirement plans, “This will be a game changer,” said BNY Mellon’s Steele. Advisors won’t be able to pick up business simply “by golfing with the CEO’s brother,” he said. Instead, the business will shift to specialists. As a result, his firm is seeking wholesalers with a technical background investment management and retirement. “Ideally you want both, but those people are rare,” he said.

Steele also mentioned that his firm is using collective trusts, which are an institutional, less expensive way to offer the same investment strategies available in the form of mutual funds. Collective trusts are even less expensive than ETFs. Of course, as I recall, they also lack some of the transparency of mutual funds. For example, their net asset values aren’t published by newspapers. 

Pioneer Investments: Open architecture is key 
Bill Taylor said the spread of open architecture in DC plans is helping fund firms such as Pioneer. He is adding portfolio consultants who can interact with gatekeepers about portfolio dynamics and how the firm’s funds fit in portfolios. 

Taylor also stressed follow-up. He said that many RIAs have complained about salespeople who’ll take them to dinner, but won’t send the materials they promise. It’s a cultural challenge for salespeople that customer relationship management systems alone aren’t enough to solve. 

Putnam Investments: Give RIAs what they want 
Cathy Saunders said she has learned that it’s important to call on RIAs the way they want to be called on. Communication via webinar and phone call can be just as effective as face-to-face, if that’s what RIAs want.

Saunders has found that many RIAs want to dig deep into the firm’s thought leadership and market outlook. They have a strong appetite to bridge the knowledge gap, she said. In addition, advisors from wirehouses are looking for business management tools and they want companies to support the tools they’re accustomed to using. 

Implications for fund firms

  • Fund fees will fall because of increased competition, as Taylor noted.
  • It’s important to segment RIAs. About 15% of RIA firms control 80% of the assets and 30% of the RIA channel is in the Northeast Corridor of the U.S., from Washington, D.C. on up, said Saunders.
  • Target date funds (TDF), the most popular DC plan option, remain a barrier to entry for fund firms because 92% of TDFs are proprietary funds of recordkeepers. However, Taylor believes the open architecture will chip away at the dominance of proprietary TDFs. Steele said that in 2010 non-proprietary funds will finally surpass proprietary funds in DC plans.
  • Providing incentives to sales people is difficult because of DC plans’ omnibus accounting, as Taylor and Steele noted. However, the situation is improves once a firm becomes a “premier provider,” Taylor said. He also noted that it’s important to get retail and retirement wholesalers to cooperate. Sometimes retail wholesalers want the retirement wholesalers to help the retail wholesalers’ RIAs to sell to DC plans when the retirement wholesalers are aware of other RIAs who are much better suited to DC sales.

Implications for advisors

  • You’ll find more actively managed funds available for lower fees.
  • Fund firms will take a more consultative approach to their interactions with you. Saunders said she has learned that it’s important to understand RIAs’ business models before deploying resources.

Related posts
* If you’re marketing to RIAs

Notable quotes from the Managing Retirement Income Conference

Speakers expressed some interesting opinions at the Managing Retirement Income Conference on Feb. 10. Their comments are paraphrased below.

  • It’ll take at least two years at 5% equity returns for people to make back what their 401(k) plans lost in the 2008  stock market decline.–Jack L. VanDerhei, Employee Benefit Research Institute
  • Retirement will turn out to have been a twentieth century retirement phenomenon. Fewer people can afford our concept of retirement because of longer lives and all three legs of the retirement stool getting shorter.–Larry Cohen, SRI Consulting
  • Only one in six LIMRA survey respondents have taken action–mostly reallocating balances–related to the economic crisis. Respondents are planning to reduce debt, delay making investments, and reduce plan contributions.–Bob Kerzner, LIMRA International
  • A tremendous demand for financial advice is coming, but people lack confidence in financial advisors.–Bill Dwyer, LPL Financial Services
  • Top earners might be willing to give up receiving Social Security payments, which they don’t need, in return for not paying more for Social Security–John Murphy, Oppenheimer Funds
  • It’s a myth that income annuities reduce liquidity and your children’s inheritance. Used properly, they can allow your assets to grow. –Steve Deschenes, MassMutual
  • There are three categories of managed payout funds: perpetual horizon endowment, horizon targeted self-annuitizing, and dollar payout targeting.–Richard Fulmer, Russell Investments

Related post: “Highlights from the Managing Retirement Income Conference

Highlights from the Managing Retirement Income conference

The stock market’s decline has changed how individuals look at retirement income. They want more certainty. That was one of the themes I took away from the first day of the Managing Retirement Income Conference on Feb. 10. The conference was hosted in Boston by the Retirement Income Industry Association.

Some other takeaways
1. Retirees–and pre-retirees–are concerned about becoming a burden on others in retirement.
2. Advisors will have to change to accommodate Baby Boomers’ lifestyle and income needs. 
Desire for certainty vs. the cost of guarantees 
The desire for certainty means that individuals are becoming more willing to give up control of their investments in return for a guaranteed stream of income, said Robert Kerzner, president and CEO of LIMRA International.

Guarantees of principal or income were a theme of many product presentations at the conference. For example, Brian Perlman, partner, Mathew Greenwald & Associates, made a case for target date funds with a guaranteed minimum account balance (GMAB). He suggested that guarantees should go into effect five to 10 years prior to retirement. Perlman said a GMAB would reassure investors and make them comfortable about investing a higher percentage of their assets in equities, which is necessary to give them a better shot at meeting their retirement income needs.

The SunAmerica High Watermark Funds offer a GMAB, according to an audience member. They may be the only such funds currently on the market, though Perlman said more are in development. These funds came up again in a presentation on managed payout funds by Juan M. Ocampo, Trajectory Asset Management, subadvisor to the High Watermark Funds.

However, said Kerzner, demand for guarantees is ratcheting up just as the credit crunch and stock market decline are forcing insurance companies to reassess their risk tolerance and pricing. Synthetic annuities may be one solution, he added. Oppenheimer Chairman John Murphy, who also chairs the Investment Company Institute, said there’s a question of how much risk a provider wants to take and at what price. 
“I don’t want to be a burden” 
Financial services firms are obsessed with their products instead of meeting people’s needs, according to futurist Bruce Sterling. Old people say “I don’t want to be a burden,” not “I want a million dollars,” he added. Sterling recommended that financial professionals seek opportunities to provide “de-burdenizing” services.

Sterling posed a dilemma to the conference attendees. If you had to choose, would you rather have a really good financial advisor? Or would you rather have Google or Facebook or social networking?

Advisors must change
Many financial advisors could do a better job of communicating with their clients. According to LIMRA consumer survey research cited by Kernzer, only 15% of respondents had been in touch with their clients during the current crisis. Two-thirds of those consumers initiated the contact. 

Oppenheimer Funds is directing some of its marketing efforts to helping advisors talk to clients. Advisors want to know how to approach client reviews and start conversations with clients, said John Murphy. More communication will raise client confidence, he added.

Ann Connolly of Deloitte Consulting said that as retirement income provide more unbundled products, the role of the advisor will be critical. Individuals will look to their advisors to assemble the right package for them. But these products can be bewildering. Advisors will need modules of advice, new financial modeling tools, and consolidated retirement management accounts.


Take advantage of a 20% discount on the Managing Retirement Income conference

You can save 20% on your registration for the conference on “Managing Retirement Income: Creating Solutions to Manage Downside Risk and Adapting Strategies to Preserve Retirement Income in a Shifting Economy” that will be held in Boston, Feb. 9 to Feb. 12.  The discount code should automatically fill when you click on the link above. If not, enter this code:XU2358IW

I’m just passing along this information. I don’t benefit financially if you use the code. But let me know if you plan to attend. Perhaps we can meet during one of the coffee breaks.

Annuities keep gaining respectability as a retirement solution

Your 401(k) plan would be annuitized for two years upon retirement, if the authors of “Increasing Annuitization of 401(k) Plans with Automatic Trial Income” have their way.

“Workers could opt-out at retirement or after those 24 months. But the authors expect that few would,” said the Tax Policy Center’s Howard Gleckman in “A New Annuity for 401(k)s.” He concluded “the new scheme is a big improvement over what we have now” because it would provide a steady income stream similar to that from defined benefit plans.

Of course, noted Gleckman, post-retirement annuitization doesn’t fix the problem that “all of the pre-retirement risk would be on workers, rather than their employers.”

I’ve noted in “Annuities gathering steam in professional journals that annuities seem to be gaining respectability as a retirement solution. 

"Pension Plans Say Thank You Subprime for Return to Overfunded "

The subprime crisis has an unexpected silver lining.

The resulting demand for high quality corporate bonds has improved the funding status of corporate pension plans. “The combined pensions of S&P 500 companies swung to a $63 billion surplus in 2007 after five years in the red, according to a May 19 report by Standard & Poor’s,” says Miles Weiss in “Pension Plans Say Thank You Subprime for Return to Overfunded.

By the way, this news article suggests a technique you can apply to your investment commentary. Write about an unexpected implication of a widely discussed phenomenon.

Writing Sample: "Don’t Get Stuck Paying Extra Taxes"

The subject line “Don’t Get Stuck Paying Extra Taxes” compelled me to open the e-mail.

That’s the power of a subject line that tells the reader “what’s in it for me.”

I opened the latest e-newsletter from Westchester Mortgage even though I was pretty sure I’m not making any dumb tax mistakes with my house. I was right. The article warned readers to be careful when using money from a retirement account to buy a house. Luckily, I don’t have to worry about that. I’ve been in my house more than 15 years.

Try to put yourself in your readers’ shoes when you compose an e-mail subject line. Your effort could increase your readership.

Why baby boomers will NOT offer a gold mine for financial services

If your business strategy depends heavily on Baby Boomer-driven rapid growth in the number of retirees, it’s time to re-think your approach.

That’s according to “The Baby Boomer Retirement Fallacy and What It Means to You,” which appears on a blog on the Harvard Business Publishing website.

Over the next 25 years, the number of retirees will grow at a rate of zero to 4% per annum, according to Kevin P. Coyne and Shawn T. Coyne, the management consultants who coauthored the blog post. The Coynes say the hype around Baby Boomer retirement fails to take into account the fact that people are staying in the work force later in life.

They’re selling versions of their study, “Smaller than You Thought: Estimates of the Future Size and Growth Rate of the Retirement Market in the United States” for prices ranging from $950 to $2,850.

Annuities gathering steam in professional journals

Annuities may be picking up steam among fee-only financial planners and investment advisors.

According to a press release from the Financial Planning Association:

Despite their tarnished reputation due to sleazy sales tactics, high expenses and weaker investment performance compared with mutual funds, popular variable annuities (VA) with “living benefit” riders may still be a sound choice for some retirees, concludes an article in the May 2008 issue of the Journal of Financial Planning, published monthly by the Financial Planning Association® (FPA®).

In his article, “A Context for Considering Variable Annuities with Living Benefit Riders,” John H. Robinson examines how the investment performance of a particular type of VA rider stacks up against an index mutual fund as each tries to weather two bear markets.

I’ve written earlier–in “CFA Institute: Consider annuities, even variable annuities” and “Financial Analysts Journal article favoring annuities about increasingly favorable coverage of annuities in the CFA Institute’s Financial Analysts Journal and other venues. More recently, annuities received favorable mention in the inaugural issue of the CFA Institute’s private wealth management e-newsletter.

The Journal of Financial Planning addressed this trend in “Variable Annuities: Emerging from the Dark Side?” by Nancy Opiela in March 2007.

But the barriers to acceptance by advisors remain, as “It’ll be tough to sell advisors on longevity annuities” suggested.