Struggling With Clients

My newest column is now available from Research magazine. Here’s a taste.

As [The Wall Street Journal's Jason] Zweig emphasized, we are all social animals. It is natural and inevitable for most people to measure their success and status against their peers, and advisors are people, too. Yet the advisor who loses business to the competitor proposing an unrealistic approach and envies him “has already lost the battle. [Warren] Buffett likes to say that companies get the shareholders they deserve. Ultimately, every advisor has to be reconciled to the perennial truth that you get the clients you deserve.”

Surely the best advisors will need to listen more carefully, to provide excellent advice and recommendations based upon the most thoughtful research, and to make their points in a way that resonates with clients both intellectually and emotionally. That’s far easier said than done, of course. Long-term financial and retirement planning is difficult business. As Dana Anspach sagely added, “It is hard to plan for something when you don’t want it to happen.” Indeed it is.  

Struggling With Clients

‘Burying the lead’ on investor mistakes

My latest “RetireMentor” column at MarketWatch is available here.  A taste follows.

“[T]he discussion of investment performance (such as it was) in no way dealt with the most important issues of all—why we make such lousy investment decisions and how those lousy decisions impede and damage our financial health.”

‘Burying the lead’ on investor mistakes

Retirement Confidence Still Minimal

As I noted earlier in another context, the Employee Benefit Research Institute issued its 23rd annual Retirement Confidence Survey yesterday and it shows that despite some economic recovery, many Americans remain terrified of their retirement prospects. 

Unreasonable Expectations Highly Desired

I spend a significant amount of time talking and working with advisors of various sorts and most of them have a decent working knowledge of the retirement income literature and have a good sense of what the advantages and disadvantages of the various approaches are.  In short, they generally know what ought to be done in most situations.  But they struggle with recalcitrant clients and prospects and how to handle them. For example, their clients and prospects resist annuitized floors.  They don’t delay Social Security.

Not-So-Great Expectations

My latest piece for MarketWatch is available here.  A taste:

Suppose a couple earning a combined $100,000 per year wishes to retire. They prepare their budget and conclude that they can live on $60,000 in retirement (note that whether their assets can sustain that level of spending is a separate and crucial question, one I will cover in my next article). The replacement research suggests that this couple will likely need around $80,000 to replicate their pre-retirement lifestyle. Can they really expect to live on 25% less than that?

Retirement lifestyle: Lowered expectations

Retirement: Winning the loser’s game

My latest piece for MarketWatch is now available.  Here’s a taste:

This need to avoid investing errors is particularly relevant to retirement planning. More retirees use systematic portfolio withdrawals to provide needed income than any other strategy by a large margin . The common rule of thumb is the so called “4% rule,” which generally postulates that one should be able safely to withdraw an inflation-adjusted 4% from a diversified portfolio of between 50% – 75% stocks annually and have the portfolio last for 30 years to roughly a 90% – 95% certainty.

However, recent research (summarized here and here ), much of it by my RetireMentor colleague Wade Pfau , “suggests that the sustainable withdrawal rate for retirees in 2000 could be much closer to 2% than to the 4% safe withdrawal rate rule-of-thumb.” The problem is largely on account of ” sequence risk .”

Retirement: Winning the loser’s game

 

MarketWatch

My latest piece at MarketWatch is here.  A taste:

The net result is that because of this risk disparity, male financial control and demographic realities, widows are frequently left in far riskier circumstances than they are comfortable with and are far too often left to bear the unfortunate costs of their late husbands’ imprudent mistakes. These costs include poverty, becoming a burden to children and facing the bitterness that often emanates from those they are forced to rely upon.

Husbands who insist on taking more risk than their wives are comfortable with or who don’t provide adequate insurance are a major threat to their wives’ financial security. Husbands who really love their wives and want to provide for them ought to consider doing things a bit differently.

Women are better retirement planners

Running Out of Money

My latest column for Research magazine, Running Out of Money, is available here.  Here’s a taste:

Nearly half of all Americans die essentially broke and entirely dependent upon Social Security payments and the kindness of others for support. Not only are they unable to withstand financial upheavals such as medical needs which are not covered by entitlement programs, but because Social Security payments are generally relatively low—they were never designed to be one’s sole source of retirement income—these seniors live out their lives every single day in serious financial peril.

Worth Reading

I commend some recent articles to your attention.

• Wade Pfau has written a new research paper called An Efficient Frontier for Retirement Income (summary on Wade’s blog here).
• Can we fix the widespread misinformation that is so prevalent? 
• Looking at investment styles.
• Robert Samuelson says it’s time to retire the American Dream.
• Joe Duran on financial-life management.
• Here’s the best article I read this week.
• Idiot of the week; unless it’s this guy; or this woman.
• Don’t miss a visual presentation of the federal budget and the deficit problem — using charts and graphs – from Above the Market.
• As Barry Ritholtz points out, the bail-outs weren’t good investments at all; here he writes about QE3.
• The stupid, it burns.
• Nate Silver’s take on the state of the presidential campaign.
• Rob Arnott shows why target date funds need to be re-imagined.
• Eddy Elfenbein on the importance of extreme events.
• Are advisers worth their fee?
• An oral history of Cheers.

Reading Milevsky

My Research magazine review of Moshe Milevsky’s terrific book, The 7 Most Important Equations for Your Retirement: The Fascinating People and Ideas Behind Planning Your Retirement Income, is available here.