Wednesday, December 21, 2016

Clients of Skilled Financial Advisors

Certified Financial Planner Carl Richards, a.k.a. The Sketch Guy, writes “In all my years of working with clients, I can only think of two people who wanted to retire in the traditional sense.” His clients find some sort of work (paid or unpaid) they want to do for the rest of their lives, or at least well after age 65. This surprised me because it is at odds with my own experience.

I sat down and wrote down the names of the first 20 people I could think of who have retired. All but four of them retired to a life of leisure, unlike Richards’ clients. Of the four, one does small contracting jobs on the side, one runs a small farm, one had to go back to work because his pension got chopped, and the last one is partnering with his son to get the son’s real estate career off the ground. Sixteen of them are enjoying their leisure.

This speaks to how rarefied the clients of some advisors are. Virtually all financial advisors prefer rich clients. The best advisors have minimums in the hundreds of thousands, but prefer clients with millions. I guess it’s not surprising that many with the drive to make millions like to keep going as they age.

I’m sure that Richards knows his clients well, but he goes off the rails when he says “The concept of retirement, as we understand it today, is completely outdated.” This may be true for his clients, but not for the unwashed masses. We can expect the nature of retirement to evolve over time, but I’m not holding my breath waiting for the day when almost all retirees continue to work some sort of job.

6 comments:

  1. I know more people who had early retirement thrust upon them by health issues than those who continued working past 65. The ones who continued to work were either tenured professors or small business owners -- I can't think of a single example in my extended circle of acquaintances who had a regular job and opted to continue working in retirement.

    ReplyDelete
    Replies
    1. @Potato: That's consistent with my experience. I guess when you spend your time with a narrow group of people, they start to look like the whole world.

      Delete
  2. My experience is like what you're describing Michael.

    Most people we know however are still working FT in their main careers- not retired.

    We do have a couple of retired friends working now. One in a small at home framing business, the other is a relatively young retiree in a PT retail situation. Everyone else is fully retired, including my wife and I.

    If a person volunteers at something are they not still considered retired? It's a chosen activity and not a paid job.

    ReplyDelete
    Replies
    1. @RBull: Whether to call volunteering a "job" or not comes down to the nature of the work. If you go to a non-profit 40 hours a week to manage some part of its operations, I'd call that a volunteer job. If you drive some older people to church, but only on Sundays when you aren't busy with something else, I'd say you've retired into leisure.

      Delete
  3. MJ, I come midway between the two of you. A huge number of people fall into the traditional model, of course, where after education comes a multi-decade career of full time work, which if reasonably lucky, leads to a state of financial independence in one's 60s. The last few years of this aren't probably much fun any more, and so on some magical day it is Enough and people retire to a Life of Leisure. The system is designed for this path to work out, though of course all sorts of thing can go wrong short-term or long-term.
    However, a significant minority of people, and I think an increasing number actually, are falling outside the traditional model in many ways. One is where they reach 60-65 and they are not quite financially independent, though no longer want to or are able to work full time. Another is where they are financially independent before they want to live a life of leisure. And a third is where for some time they are outside the mold of "full-time salary", as entrepreneurs, or participants in the gig economy. All of this is smoothing out the "boundary" of retirement.
    In my personal experience, there is a lot of what Carl Richards describes. From my personal network: Technical experts who leave their full time jobs sometime between 50 and 70 years old, and consult part time. Executives who join Boards, nonprofit or corporate ones. Corporate bureaucrats who found their own minibusiness which makes a small amount of money but probably not much. Professors who become emeritus, and continue their research say 3 days a week instead of 5, being paid by their defined benefit pension they would receive regardless.
    I do think a financial advisor is disproportionately likely to work with such people, but it is not only them and I don't think it's a minuscule group of the population at large.

    ReplyDelete
    Replies
    1. @Martin: All types of retirement you describe certainly exist. I can certainly think of people who continue to work past age 65 by choice among my business contacts. I agree that the number of people who choose to reject traditional retirement isn't minuscule. But, I deliberately drew up my list of 20 names from family members, friends, and people in my neighbourhood. This made it clear to me that those who reject traditional retirement are far from becoming a majority. We are a long way from being able to declare traditional retirement dead.

      Delete