Your Retirement Needs an Eco-System

Wikipedia says an ecosystem is “a community made up of living organisms and nonliving components.” A digital ecosystem is a “distributed, adaptive, open socio-technical system with properties of self-organization, scalability and sustainability.”

Welcome to the cutting edge of retirement planning.

In my retirement utopia, clients know the answers to important questions. How much will I need in retirement? How will I pay for healthcare? Can I safely age in my home? They have confidence in the answers to those key questions – and others. Collectively, we call that “wellness”. They call it “peace of mind”.

In my utopian world, financial professionals are able to provide those answers. They are challenged by the underlying complexity that is most often lost on the clients. Effective and reliable solutions are the common objective of clients and financial pros, but there are a lot of moving parts to accommodate, including vagaries of health, financial markets, the penalty of taxes and the longevity of the clients themselves. The questions are simple, the answers not so easy.

Enter The Eco-System

Creating a solid retirement solution involves several asynchronous variables – the Rubik’s Cube of planning objectives. Investment management plays a role, actuarial science has a view, client behaviors and preferences weigh in. Information flow is critical. Financial planning software collects data and mixes scenarios. And all of these capabilities have to talk to each other or the result is a jumbled mess of one-off “answers”. The music store instead of an orchestra.

I like the ecosystem definitions above, especially when they are combined. The interplay between “living” and “nonliving” is elegant science-speak for the dual and complementary roles of technological efficiency and human touch. Financial services technology in the retirement planning utopia is not a replacement for advisers; it’s a tool set that creates capacity and better service. The second definition — the digital ecosystem — goes further: adaptive — open — self-organization — scalability — sustainability. The ecosystem is less a collection of parts than it is a dynamic combination of elements that evolve with changed conditions. Orchestra-like.

No Retiree Left Behind

Competitive retirement planning offerings should have the same flexibility – and efficiency. Can we really say that every client feels covered for healthcare costs, protected income and has adequate liquidity for big expenses in retirement? We will be judged at some point not just by the quality of our solutions but for the ability to reach all of the clients in our care.

We can debate the key parts of a retirement planning ecosystem, so I will start the dialogue with my top ten observations:

  1. Wellness. Wealth without health or health without wealth? Each is half a loaf. Retirement planning without integrating health care funding and longevity planning is just malpractice. Wellness is highly subjective but assumed by our clients. Read more
  2. Taxes. The second issue uniting all the world’s clients is taxation. If we can’t talk about the impact of taxes — all kinds of taxes — then we can’t really say we have a comprehensive plan. In retirement, taxes are especially significant. Knowing which retirement account to draw down remains among the very top client concern.
  3. Regulation and its impact on client engagement and risk. A mouthful for sure, but the shorthand is that “best interest” is table stakes and most consumers would be horrified with anything less. The world’s fiduciaries are increasing in presence and power. Doing good and doing right are pillars for running a good advice business. Do we really need the federal government to design our business strategy?
  4. Digital investment services. So far beyond the label of “robo,” these capabilities are a godsend for busy advisers working with multiple family generations. It’s now time to reverse the order of their introduction. First design everything we can to be delivered through the 24/7/365 machines and save the humans for only the most essential work of understanding and translating client needs and concerns.
  5. Automation of client data and adoption of centralized data management. Will this generation of advisers be the first to eliminate Excel and the Post-it note? Adoption of powerful tools lags way behind their creation. Give that CRM company a chance to prove it’s not just good for mailing lists.
  6. Communications. Three principles here: how, when and why. Flexibility in the ecosystem customizes your outbound messaging by sharpening the content and its delivery. But our language has to improve. It’s not just jargon – it’s volume. Applications and prospectuses raise more concerns among most consumers, defeating their intent. We must do better. Language is the fastest way to change perception.
  7. Security, Created by Protection. Three perspectives here. The first is to ensure protection and integrity of client information. Attackers abound. The second is to increase focus on the vulnerability of people as they age. We are still in the lip-service stage here. And finally, we have to include “protection” in our lexicon of solutions. Every client has a balance sheet and all but the most wealthy will need to leverage their assets to provide protection against the risks of living too long, costing too much or needing liquidity for big expenses. Where to start? How about a retirement paycheck?
  8. The risks of an aging population. Doubling down on “security”, take a lesson from the historic collapse of the Big Three automakers: Demographics matter. The baby boomers own the market for financial advice and pay most of the bills for years to come. Their median age is 66 and they likely trail​ two attached generations with them, along with a myriad of accounts and complexity and risk. Read more:
  9. Adviser hiring, training and retention. Where to start? Surveys suggest top advisers average age 55-plus, and very few young people seem to be entering the industry. ‘Nuff said perhaps – but what to do? We can spend a lot of time here. Financial professionals still in the game have the best opportunity in decades to build a fantastic business. But it will be different from the job of the past 30 years. Getting through a retirement is different than saving or investing for one. Different skills, different systems, different leadership. Older advisors are partnering with younger folks with complementary skills. Real retirement advising needs a team.
  10. Integration. The inability to see all of your accounts and all of your investments makes clients crazy and prevents financial professionals from providing an effective retirement strategy. Annuities have to be included on the custody platform along with managed accounts and individual securities. Everything has to be in the planning software as well. And then we need to optimize – truly – across the household for risk and tax liability. The very best advisers do this today with heroic effort that begins with integrating systems not easily connected.

Winners Connect the Dots

Onward. The true north for retirement is simple, intuitive experiences for both advisers and clients focused on achieving better outcomes. Industry leadership has shifted to players creating supportive ecosystems that optimize the best of people and machines. The firms that can integrate the great FinTech inventions and product solutions with simple client communications are winning.

Yet despite the appeal of a unified approach, the status quo is a formidable obstacle to change — most advice firms are experiencing record results consistent with record markets. A deeper look reveals structural weakness in many advice offerings that stand in the way of providing a seamless, flexible and compelling client experience. Let’s see who wins the war for net new assets and share of wallet. The path to success is paved with ….simplicity.

Related: We Just Flunked the Retirement Test