Today's Advisory Career

The Dynamic Retirement Plan

Why financial planning should be at the core of all client engagements

by Jonathan W. Levine, CFP, CIMA

Mr. Levine is Senior Vice President, UBS Financial Services Inc. Visit

As financial advisors, I believe we all may have had similar experiences: A few weeks ago, a longtime client, who runs her own company and is three years away from her planned retirement, called me in a panic.

She had been watching the news and all she saw was doom and gloom: an unpredictable U.S. presidential election with candidates talking about extreme economic, tax and healthcare overhauls, economists projecting slower growth around the world, foreign markets and energy prices falling sharply, hacking scandals and terrorism.

All of these things are scary in their own right, but were even more so because they were causing significant volatility in U.S. markets. My client feared that these market shocks had sent her off track and wanted to know what she should do about it.

While it’s understandable that the collision of volatile markets and approaching retirement would make her nervous about her finances, the reality was that she didn’t need to be.

We had created and regularly updated a tailored financial plan for her that was based on her goals, to help adjust for periods of volatility we all know can occur, and had mechanisms in place to help manage risk. Together, we walked through the updated results of her plan, which showed that she was still on track. She could stay the course she is currently on and didn’t need to make any reactionary moves in her portfolio. She could go back to focusing on running her business while worrying less about her financial plan.

An outcome-oriented approach

While this experience may be typical for many of us who are planning-focused, it served as an important reminder of the real value of an outcome-oriented approach and why creating plans should be prioritized in all client engagements. Done right, it provides clients with comfort that they are progressing toward their goals and helps create a structure for good, long term decision-making.

I have been in the wealth management business for more than two decades, and my focus with clients has always been on helping them set and achieve goals through outcome-oriented financial planning. It is my practice to have several conversations with clients to get to know them, understand what their life goals and financial objectives are, aligning current and potential cash generation to accomplish them in an established timeline.

In my practice, we are very focused on creating core financial plans that are updated regularly, utilizing them as a guiding document to help manage expectations, set a target rate of return and create risk appropriate portfolios, adjusting them over the years as clients move from one life stage to the next.

In my view, having a strong and, importantly, dynamic financial plan has always been important; however, over the last 20 years, it has become critical to client’s long term goals and strong client relationships. During that time, we have seen the market experience several periods of tremendous gains, dramatic falls and measured recoveries. The frequency of volatile periods has increased, resulting in outcomes and entrenched concerns among investors in my opinion.

These are challenging times to discuss planning and long-term investment principles with clients, but the more we can help clients look past the noise and focus on managing what they can control, the better off they will be. Each generation has its own context and set of concerns, so approaches should be tailored to suit their particular needs.

Each Generation is Different

Recent fluctuations in global markets seem to have unnerved many investors, much like in the story of my client above. Coupled with low interest rates, these market cycles can cause to have different kinds of discussion about accumulation and income opportunities with clients, particularly with those closer to, or already in, retirement.

The Baby Boomer and so-called “Greatest” generations are generally more comfortable with the concepts of volatility and risk management given their long experience in the markets and what are now typically conservative portfolios. Younger generations (Gen X/Millennials), on the other hand, tend to trust the market much less as they have grown up with the long periods of volatility.

Consequently, younger generations tend to hold onto more cash. Millennials, in particular, hold 41% of their portfolio in cash on average, which is more than twice as much as Baby Boomers, according to a 2016 UBS Investor Watch report – The conflicted investor*, surveying wealthy investors. The same study found that this group has more regrets about the financial crisis than any other generation: more than half (52%) said they regret selling investments at an inopportune time and 68% said they regret not investing more in the stock market’s subsequent recovery.

So how can a financial advisor help a client that’s still reeling from the financial crisis, or scared by current events, paralyzed by fear of loss? By helping shift their frame of reference to the outcome.

By planning around objectives, acknowledging there will likely be fluctuations and periodic adjustments needed along the way, and making clear that, in this day and age, unexpected events are to be expected, we can help our clients create a better context for understanding what is in their portfolio, what should be there, and what the real triggers are for making adjustments to an investment plan. The benefits are undeniable: Nearly 100% of participants in the UBS Investor Watch survey said that their financial plan helps them focus on long-term goals and avoid tactical changes during periods of volatility.

It’s important to note that these plans cannot sit on a shelf. They need to be dynamic, updated at least every other year, to incorporate new assumptions, variables and changes in a client’s life circumstances. It goes almost without saying that financial advisors have to work collaboratively with clients, creating open lines of communication, to help make sure this happens.

The First Conversation

The first conversation – the one that opens the door to build the foundation of the financial advisor-client relationship – starts differently with each client at each stage of life:

  • Core retirees, or those that already have been retired for a few years, usually have already adjusted their portfolios to their circumstances and are most interested in income and stability. They are likely focused on how they can help their families or causes important to them during their lifetime and what purpose they want their wealth to serve for the next generations.
  • A shared goal among most of our Baby Boomer clients is that they want to set themselves up for or manage the
    transition into a comfortable retirement. Many want to stop working at some point in the not-so-distant future, but need to have adequate investments and savings and the right mix of income and growth oriented investments to be able to do so. Income replacement and perspectives on what to expect in retirement are priorities for this cohort.
  • By contrast, for Gen Xers, retirement is a little further away (but not much). Often they are both reaching their peak earning years and their children are reaching the age where higher education costs kick-in. So, our initial conversations are generally geared towards a lifestyle adjustment – getting them thinking about retirement planning while understanding the impact of their expenses.
  • For younger generations, starting the planning process early is helpful, but can also be challenging. Millennials often do not want to sacrifice too much of their disposable income – or simply don’t have the extra income needed – to plan for events far in the future. We focus our initial conversations on maintaining their lifestyle while simultaneously creating a savings habit by saving money for their children’s education, contributing to a company retirement plan, and other expenses such as house payments.

Planning for Unpredictable Changes in Healthcare

The first conversation – the one that opens the door to build the foundation of the financial advisor-client relationship – starts differently with each client at each stage of lif

From any starting point of financial planning, perhaps the biggest topic for any generation to tackle is healthcare. I think it is a common misconception that healthcare financial planning is only critical for clients with health issues or for whom health problems run in their families.

While it is true that this group has the greatest financial challenge ahead of them – combating more expensive drug prices, recent shifts in healthcare law and insurance company consolidation – the reality is that, even healthy clients need to prepare for some, possibly large, financial burden in the future. People are living longer (life expectancy nearly doubled in the 20th century) and healthcare costs are continually rising.

Fidelity recently estimated that healthcare costs have an inflation rate of [5%] over time for single adults, and the firm’s 2016 Retirement Health Care Cost Estimate found that healthcare costs for retired couples aged 65+ are expected to total $245,000 over the span of their retirement, a 29% increase since 2005. And these are just the known expenses – variable healthcare costs to cover chronic conditions, diseases, injuries, or long-term care can change at any moment, and it is crucial to plan for the possibility that individuals or couples will likely need to spend significantly more in the future than they initially anticipated.

For this, and a host of other reasons, I think the relationship between financial advisors and clients has to become very personal very quickly. It’s important for advisors and clients to maintain an open and honest dialogue to discuss changes in life (career, family, health, etc.), evolving goals and concerns as they arise. By doing so, you and your clients can develop the trusted client-advisor relationship needed to engage in goal-oriented, dynamic financial planning, thus creating a greater sense of comfort for clients around their ability to potentially achieve objectives and for you in building a strong practice.

* About the survey

UBS Wealth Management Americas surveys U.S. investors on a quarterly basis to keep a pulse on their needs, goals and concerns. After identifying several emerging trends in the survey data, UBS decided in 2012 to create the UBS Investor Watch to track, analyze and report the sentiments of affluent and high net worth investors.
UBS Investor Watch surveys cover a variety of topics, including:

  • Overall financial sentiment
  • Economic outlook and concerns
  • Personal goals and concerns
  • Key topics, like aging and retirement

For this 14th edition of UBS Investor Watch, 2,638 affluent and high net worth investors responded to our survey from December 16 – 28, 2015. The core sample of 1,835 investors have at least $1 million in investable assets, including 494 with at least $5 million. With 91 survey respondents, we conducted qualitative follow-up interviews.

This UBS Investor Watch also includes an oversample for younger generations:

  • 584 Millennials: Respondents ages 21 – 29 who have at least $75,000 in household income
    or $50,000 in investable assets; respondents ages 30 – 37 who have at least $100,000 in household income or $100,000 in investable assets.
  • 533 Gen X: Respondents ages 38 – 49 who have at least $250,000 in investable assets.
    In light of the recent market volatility, a follow-up survey was conducted from January 24 – 25,
    2016, with an additional 500 investors with at least $1 million in investable assets.- Full report available upon request

The case study presented, based on actual client experiences as told by our Financial Advisors, is provided as an illustration and may not be representative of the experience of other clients. There is no guarantee of the future success of any of the strategies discussed.

It is important that you understand the ways in which we conduct business and the applicable laws and regulations that govern us. As a firm providing wealth management services to clients in the U.S., we are registered with the U.S. Securities and Exchange Commission (SEC) as an investment adviser and a broker-dealer, offering both investment advisory and brokerage services.

Though there are similarities among these services, the investment advisory programs and brokerage accounts we offer are separate and distinct, differ in material ways and are governed by different laws and separate contracts. It is important that you carefully read the agreements and disclosures that we provide to you about the products or services we offer.

Please visit our website at ◊




Any information presented is general in nature and not intended to provide individually tailored investment advice. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc. Neither UBS Financial Services Inc. nor its employees (including its Financial Advisors) provide tax or legal advice. You should consult with your legal counsel and/or your accountant or tax professional regarding the legal or tax implications of a particular suggestion, strategy or investment, including any estate planning strategies, before you invest or implement.