Wealthy retirees can present a unique opportunity for advisors looking to enhance their high-net-worth (HNW) strategy. They do not obtain a standard paycheck like other HNW clients, but they often have equally complex financial situations to navigate.
Having various sources of income presents its own challenges when attempting to avoid excessive taxes and fees, and their desire to pass down their estate gives advisors opportunity to build relationships with the client’s family as well.
Let’s take a deeper dive into what HNW retirees actually need from an advisor’s services.
Sources of income for HNW retirees
In order to effectively serve this type of HNW client, it is important to understand their sources of income, concerns about retirement, and what they expect from a financial advisor.
Vanguard research states that retirement income typically comes from five primary sources: 42 percent from guaranteed lifetime income, 20 percent from tax-advantaged accounts withdrawals, 12 percent from a part-time job, 7 percent from savings account withdrawals, and 4 percent from specialty accounts.
Research demonstrates, however, that individuals who successfully saved for retirement continue to save 31 percent of their income on average. This aggressive savings strategy throughout retirement indicates that there are things for which these retirees are still planning.
How do HNW retirees really feel about retirement and their finances?
Jason Notte, personal finance reporter for TheStreet, states, “Though only one in five wealthy retirees worry about outliving their assets, their health remains an issue.” According to the UBS Wealth Management research to which he refers, 73 percent of wealthy retirees state getting sick is their top retirement concern. Nearly half (47 percent) are also worried they will not have anyone to take care of them.
Finances are not the only that that concern those HNW clients nearing retirement. Wealthy retirees are equally concerned about how they will adjust to a retirement lifestyle and what will occupy their time.
The same UBS Wealth Management research found that 64 percent of wealthy workers stated they would miss the comforting stability of the work schedule more than their salary. Over half of these respondents also stated they feared the adjustment to retired life and leaving work colleagues behind. Other fears cited include losing a sense of purpose and filling the hours of free time.
It appears that in addition to navigating different sources of income, wealthy retirees may need assistance in lifestyle planning as well.
What do HNW retirees expect from advisors?
As mentioned previously, wealthy retirees are saving more and spending less than in the past. A 2016 Journal of Financial Planning study found that the wealthiest fifth of U.S. retirees were spending 53 percent less than they could have. This begs the question: How can financial advisors cater their services to the unique needs of wealthy retirees?
As is the case with many retirees regardless of wealth status, they want cash flow management advice; a clear picture of their retirement income sources and when to leverage them; and assistance with income tax planning. Additionally, they expect assistance in preparation for healthcare costs through Medicare, insurance, and HSAs as noted in their tops fears about retirement.
Many wealthy retirees are highly concerned with passing their money on to heirs and charities as well. If they have not developed a comprehensive estate plan or plans for charitable giving, this is where an advisor can provide a lot of value not only for the clients but also for themselves. By guiding retired clients through the estate planning process, advisors can develop trusting relationships with the clients’ children and family and possibly convert them into clients in the future.
The main goal of financial planning relationships is often saving for retirement; however, it is imperative for advisors to remember that they can provide value to HNW individuals who are already retired. While wealthy retirees have completed the steps of successfully saving for retirement, they still want help navigating their income and wealth transfer throughout these years of their lives.
To learn more about serving wealthy retirees and other top HNW personas, click here.