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Retirement Pros Reveal Their Own Best Interests When It Comes to Their Retirement Plans

Retirement Pros Reveal Their Own Best Interests When It Comes to Their Retirement Plans
January 09
02:08 2018

Every fiduciary must act in the best interest of the client. Sometimes that means digging down deep and convincing clients to reveal their greatest concerns/fears. Retirement pros spend a lot of time trying to convince people anxiety is not in the best interest of retirement savers. But what about the retirement professionals own best interest when it comes to their retirement plans? What could retirement savers learn about their best interests when they discover how professionals manage their own personal retirement concerns.

When it comes to retirement savers, the fiduciary hears variations on a common theme. They’re worried about losing money in a stock market crash and running out of money before they run out of life,” says Dan Thompson, owner and founder of Wise Money Tools in Eagle, Idaho.

Even with the market reaching new heights, investors can escape this singular dread. “The most consistent concern investors have is always ‘when is the market going to go down,’” says Joseph Sroka, Chief Investment Officer at NovaPoint Capital LLC in Atlanta, Georgia. “The memories of 2008 are still fresh in everyone’s mind, despite the market recouping those losses and then some in the past nine years.”

The root of this concern, as always, lays in the fear of the unknown. In this case, the unknown is the future. What will the future bring? What will the future take away? Am I prepared for whatever the future has in store? And wealth offers no protection from this anxiety. “Over the years, survey after survey finds that retirees’ biggest concern is running out of money,” says Jerry Vahl, a retirement planning expert at AmeriLife in Clearwater, Florida. “This is true regardless of the size of the retiree’s retirement portfolio.”

You can count feeling among retirement savers as assuredly as you can count the fingers in a hand. Dan Egan, director of behavioral finance and investing at Betterment in New York City, says, “Consistently, savers are concerned they won’t have enough money set aside for retirement. In fact, according to the Employee Benefit Research Institute, only 18% of American workers feel very confident that they have enough money for a comfortable retirement.”

Financial experts help their clients address these concerns by trying to get them to accept what they cannot change and understands what’s in their domain to change. “We cannot control the economy or the markets,” says Sroka, “but we can construct portfolios that make clients comfortable with the risk they are taking.”

Most notably, individual retirement savers in general cannot be expected to know and embrace the same sophisticated concepts contemplated by their institutional counterparts, although these institutions (namely, plan sponsors) can effect changes to help retirement savers. “To address these concerns,” says Egan, “it’s important that financial products don’t require individuals to make decisions like institutions, as the knowledge and access is not the same. Financial products should be time efficient, transparent in fees, and practices and automate good behavior. Auto-enrollment and auto-escalation in retirement plans allow for retirement savings to happen in the background – this permanently overcomes inertia and bumps up contributions without employees having to do a thing. Automatic monthly deposits allow for savings to happen without action, time or effort on the investor’s end.”

But, what about when it comes to retirement professionals’ own retirement accounts? What do they do for themselves? And how might knowing this be instructive for retirement savers?

As we mentioned in last week’s article “How Can Fiduciaries Use New Tax Cuts to Nudge 401k and IRA Retirement Savers?” (, January 3, 2018), the window of opportunity to improve one’s future retirement right now has just been nudged open. “I am not immune to concern if I will have enough money saved for the future,” says Sroka. “I am planning to use any benefit from the new tax plan to invest additional money for the future.”

Some advisers are much more comfortable using annuity products than the typical investor – at least for a limited percentage of their retirement assets. Clifford L. Caplan of Neponset Valley Financial Partners in Norwood, Massachusetts, says, “One of the main features of retirement planning that I perform is taking a portion of their investment assets and investing them in vehicles that provide ‘guaranteed’ lifetime income. There is generally a trade-off between investment returns and these guarantees but many like the idea of adding to their guaranteed income along with Social Security. I have done the same for my own future retirement as I have allocated a portion of my investment assets in such a vehicle.”

Again, it’s vital to remember financial veterans generally have a greater depth of understanding when it comes to the nature of investments and the markets. They’ll see things a typical retirement saver can’t see. This allows them to take advantage of market opportunities, often well in advance of the rest of the crowd. (This is also why retirement savers are willing to pay for their advice.) There are well-establish investment methods that have consistently (but not always) mitigated the downside. “Value investing can alleviate some of the downside,” says Thompson. “From this perspective there is little value to be found in the market. Maybe taking some money off the table is a good idea. Then when markets correct or crash you can take advantage of the lower values. Storing money in cash value, then using it to buy into opportunities is similar to how Warren Buffet achieved his financial success. Waiting to buy $10 bills for $5. I personally have built several cash value policies. Currently, I use the cash value to build homes. When the real estate market softens, I’ll put the money back into my policy and wait for the next opportunity. That may be after a stock market crash or any market where prices have been drastically reduced. Value investing is simply waiting for markets to become ‘irrational’ and then invest while they are on sale.”

Long-term investors like retirement savers can easily act like a fiduciary for their own assets. All they need to do is look in a mirror – but not for their own reflection. Look in a mirror a retirement professional is looking into and see how that reflection invests for retirement.

Christopher Carosa is a keynote speaker, journalist, and the author of  401(k) Fiduciary SolutionsHey! What’s My Number? How to Improve the Odds You Will Retire in Comfort and several other books on innovative retirement solutions, practical business tips, and the history of the wonderful Western New York region. Follow him on Twitter, Facebook, and LinkedIn.

Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

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