In my last two columns, I wrote about underserved clients. I explored the situation of young investors and of women, both of whom are underserved client groups. I believe that another underserved group is retired or almost-retired clients. Ironically, they hold the greatest percentage of assets in many advisor books.
As a society, we have long made assumptions about retirement and retirees — even Peter Mansbridge talks about it in a recent TV ad. He shares how we once thought of retirees as “over the hill” or “out to pasture.”
It was commonly assumed that as clients neared retirement, they needed primarily safety and security in their portfolios. Advisors routinely recommended that clients shift their portfolios to safer, lower-return holdings as they neared retirement age (which they assumed to be between 55 and 65).
Four things to consider.
First, people are living longer. In Canada, life expectancy in 2023 was about 82 years. As recently as the 1960s, this figure was in the 70s. Children born today are even more likely to live to 90. And our population will continue to age.
In simple terms, if we continue prioritizing safety at the expense of growth, clients will run out of money.
Second, much time and energy are being spent to determine how people should think differently about retirement. Where will people find social connections and purpose? And what financial implications will this have for clients?
Many people answer those questions by continuing to work well beyond the traditional retirement age — either by necessity or choice. According to Statistics Canada, over 1.9 million Canadians aged 65 and older reported employment income in 2022. Combined, these Canadians earned almost $59 billion that year.
Third, given the talent constraints we are beginning to face in Canada and elsewhere, employers will want people to work longer. While ageism appears to remain relatively acceptable, it is illegal and impractical.
There will come a time when retirement age isn’t an assumption, but rather a considered decision based on many different factors.
Finally, this is an important and growing client group. Over the last 40 years, the 65-plus cohort has more than tripled in size. In 2023, these Canadians represented almost 19% of the total population. By 2030, they could represent over 23%, according to Statistics Canada.
A new approach
For advisors and firms, it’s essential to think differently about pre-retirement, retiring and retired clients.
For advisors:
- Don’t make assumptions. Don’t assume when a client will retire, or whether they’re looking forward to it or are fearful about it. Don’t ask, “Are you still working”? Be aware that people’s plans for retirement are increasingly variable. Some may not wish to retire until much later than traditionally expected, while others may seek to stop working well before that.
- Understand what they want. When a client indicates they are preparing to retire, ask about their plans and goals. Don’t assume they will be content with a traditional retirement. Will they travel? Volunteer? Work part-time or even full-time in another role? Start a business? Use this information to determine their income needs.
- Learn about different retirement income sources. Become an expert in defined benefit and defined contribution pension plans, government retirement benefits and other savings tools. Advisors without a solid understanding of these sources of retirement income cannot effectively support this significant client segment.
- Don’t automatically move the portfolio into safe investments. Think carefully about how to structure a client’s portfolio to produce income over a longer life span. Many advisors now plan for income needs into a client’s late 90s and even later.
- Go above and beyond. If many clients fall into or are approaching this group, consider offering more than just financial planning and advice. Provide links to websites and other tools that may help them enjoy a fulfilling retirement. They’ll be grateful, and it won’t require much extra effort.
For firms:
- Respect longevity. I recently heard of a firm that hired a chief longevity officer. Their role is to ensure that retiree clients are appropriately considered in the firm’s product offerings, and that hiring and retention practices don’t support ageism. Whether or not your firm has this type of role, ensure your advice and product offerings reflect the needs of this client group.
- Update training. Be sure your training programs incorporate the idea of variable retirement dates and teach advisors how to avoid assumptions about when clients plan to retire. Include modules that address age bias.
- Ensure tools are fit for purpose. Make sure your firm’s retirement planning tools and processes reflect the increased longevity we’re all facing.
I encourage advisors and firms to respect retirees and pre-retirees as a client segment. They represent a growing portion of Canada’s population and will continue to be an important group with significant assets and purchasing power.
Don’t take them for granted or overlook them in favour of other clients. They will need planning and advice, and may be your best clients, for much longer.
Susan Silma is a lawyer and former regulator with a deep understanding of the client perspective. She is passionate about simplifying and humanizing the client experience in financial services, while navigating the complex regulatory environment and promoting compliance.