Turning to a professional financial adviser for help in charting a path to retirement is a big step and requires honest conversations about how you spend money, what you need in retirement income and the level of investment risk you can tolerate.
But what is the point in having those types of serious and deeply personal conversations if no one is really listening, which unfortunately happens far too often when investors and advisers sit down to discuss retirement planning, according to a 2023 study by the Alliance for Lifetime Income and Cannex, a financial analytics and research firm.
An example of this communications breakdown is the survey’s finding that 77% of financial advisers say they have suggested their clients include protected income as part of their retirement portfolio, while just 33% of investors say they heard the adviser raise the subject. The survey also shows 44% of investors saying they asked their advisers about protected income, but just 14% of advisers say that is what they heard from clients.
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So, what is going on? It could be a misunderstanding of terminology. Or it could mean people are not listening to each other. As Fight Club author Chuck Palahniuk once said, “People don’t listen, they just wait for their turn to talk.”
Taking notes and summarizing are necessary
To get the most out of the financial planning experience, both investors and advisers need to actively listen to each other. That means taking notes and summarizing what you think you are hearing throughout the session. Say it, say it again, then say it one more time. Too much is at stake to risk any chance for misunderstandings and missed opportunities.
If you are nervous about having more than half of your retirement savings in the stock market, tell your financial adviser — more than once. And ask the adviser to explain your position on equities. You want to hear the adviser accurately summarize your point of view.
As The 7 Habits of Highly Effective People author Stephen Covey respectfully observed, this way of communicating goes back to a process taught to our earliest settlers by Native American tribes. As a person was speaking to a group, they held on to a talking stick. When someone wanted to join the conversation, they first had to accurately summarize what the speaker had just said. If they could do so, they were handed the talking stick. If they could not, they were not allowed to talk yet because they were not really listening.
We are at a critical point in our nation’s history when hearing people’s desires and fears about retirement is essential, and we should be using the talking-stick method more than ever to make sure we are communicating effectively. This year, a record 4.1 million Americans will turn 65, and that milestone birthday will occur to the same number of people every year through 2027. We have never had so many people simultaneously reaching the standard retirement age as we are now.
Women especially need effective communication
Women, in particular, benefit from effective communication. Their longer lifespans, lower savings and disengagement from the advisory process leave many at risk of not reaching their retirement income goals. When they do not feel “heard,” many decide to leave their adviser after their spouse dies.
The ALI-Cannex survey found that 61% of people age 61 to 65 have already quit working entirely or moved to part-time employment. As more people move into retirement, 80% of financial planners say they changed their retirement planning approach in the past year. The top reasons for changing their advice were inflation concerns, interest rate increases and market volatility. People’s concerns about health care costs and taking care of family members are real and need to be part of the retirement income conversation as well.
Financial advisers may believe they are taking these concerns into account in part by suggesting the possibility of protected income for retirement, and investors may believe they are clearly asking for that type of help, but if neither one feels the other is hearing them, then it isn’t really happening. It is time to break out the talking stick.
