My clients are wealthy individuals – many of whom are close to retirement or already retired. Unlike the vast majority of South Africans, these are people who have enough money to retire well. By retiring well, I mean really well. They don’t have financial worries about their future. They can do the things they want to do like travel, visit their children overseas and pursue interesting hobbies. They can afford to enjoy their lives and still have money left over. Interestingly, most of them did not inherit anything of value, nor were they high-powered executives or financial gurus.
So what’s their secret?
Over the years, I have developed a picture of what it took these people to get where they are. And based on this picture, I’ve developed my top five tips to retiring well:
Could machines really replace wealth managers?
There’s much talk about jobs like financial planning and wealth management becoming careers of the past. Futurists like Graeme Condrington are even suggesting that by 2025, these jobs, as we know them will be gone. Replaced by algorithms.
There are many reasons why this evolution has legs.
- For one – there’s a growing generation (who already distrust our industry) transacting online.
- Then there’s the gap in the competitive advantage of many wealth management firms. Their financial products are already commoditised and could be automated very soon.
- Financial planners are also failing to meet the financial needs of their clients. Proper financial planning includes cash flow planning and risk planning, much more than just investment management. The industry has grown sluggish in answering real questions and is often still using linear models based on average data (which also fails to address these questions).
- Research is showing us that client decisions have more to do with earning and spending, rather than saving or investments. So saving is more of a by-product of life decisions. This means that truly effective, lifetime financial advice should have little to do with financial products – if at all.
But, there’s a growing case for a financial planner who is nothing like a robot - and everything like a human. One who knows how to ask questions – with empathy and insight. The wealth managers who will stand the test of time will be the ones who are looking at your life and your finances holistically and advising accordingly. I believe that the financial planners of 2025 and beyond are:
- In touch with their clients and involved in major life decisions because their advice is indispensible and has more value than just the implications to a financial products. For example: consider the effects of the decision to opt for private school education. A great financial advisor would explore this option in detail with their client and spell out the impact it has on the families’ retirement savings.
- Giving their clients the best available tools, financial calculations, and data to assist in their decision-making processes. They are in essence the ones who are empowering their clients to make great financial decisions and arming them to have the difficult conversations when necessary.
- Answering their client’s most pressing questions. As an example, we recently helped one of our clients decide on a savings strategy for retirement. A professional single mum (mid-fifties), retirement savings lacking but she’s still supporting her adult children. Our analysis gave her the tools to answer some big questions and have some tough conversations with her children.
- Giving their clients new insight and even inspiring them. I talked to a client recently about his health – it is sometimes the biggest risk in a financial plan. Even if there is enough insurance or capital, it concerns me when a client’s value is tied up in his work. When he can no longer work, his money will be relatively meaningless! Sometimes it’s about the self-discovery of the underlying fear/s behind the behaviour (which often relates to messages about money that clients accumulated through the years). Not all clients are comfortable discussing these issues. These conversations require deep trust. The kind that robots can’t offer.
So while I understand and agree with these robo-adviser predications -there’s an equally growing demand for tailor-made, personalised financial planning that’s more like life planning too. Now there’s our challenge.