Are clients worried they'll outlive their money? If so, they're surely not alone.
Indeed, Allianz Life Insurance Co.'s 2024 Retirement Study found that almost two-thirds of Americans are more afraid of running out of money than they are of death.
To help assuage clients' fears, create a retirement budget for them to practice on. That's the approach taken by Derrick Kinney, a financial coach and longtime financial advisor.
"Often three or four months into it, [clients] would say, "'Oh, my gosh, we can actually do this and retire comfortably!'" he tells ThinkAdvisor in an interview.
Kinney, a keynote speaker for Fidelity, among others, completed the sale of his Ameriprise retirement-focused practice in 2023, after morphing into a podcast host and author of "Good Money Revolution: How to Make More Money to Do More Good."
In the interview, Kinney reveals the five big challenges advisors ask about most, and he discusses how they can "decommoditize" themselves and position their practice to sell at a big profit.
"Think of it as a franchise model," he recommends.
He also talks about clients having a hard time absorbing the idea of investing for the income gap.
Here are highlights of our conversation:
THINKADVISOR: When you were an advisor, what did you find to be one of the biggest predictors of success in retirement?
DERRICK KINNEY: Six to 12 months before the client wanted to retire, I'd have them live on a practice retirement budget.
For example, if they said they needed $20,000 a month, we'd take out that exact amount and put it in their checking account. They'd have to live on it while they were still working.
Often about three or four months into it, they'd say, "Oh, my gosh, we actually can do this and retire comfortably!" without the threat of running out of money.
And often they would need less than they'd thought.
One of the biggest retirement mistakes is failing to invest to create income to fill the income gap, you write. Please elaborate.
Clients understood the accumulation model, but income was something that was more of a mystery.
I told them that if you don't invest for income and rely only on stocks and aggressive things, should they lose a lot of money the first year after retirement, they won't be able to make it up.
What do advisors need most, and what do they ask about mostly?
Advisors have five big challenges they're struggling with.
Perhaps the most common is that they feel stuck hitting the same revenue ceiling every year.
Secondly, they question their current strategy: They're working hard and trying new things, but that's not getting the results they want.
What are the other big concerns?
They worry where their next client will come from. They need to be thinking a few clients down the road to make sure they've got their pipeline of quality clients built up.
