Are advisors failing clients on Social Security knowledge and election options?
By Brent Enders
Recently, I interviewed Wealthnetic’s CMO, Mark Mersman, about the industry's latest hot topic, Social Security. Unfortunately, many advisors are failing their clients when it comes to their knowledge on the subject. Mark shares the details that you need to be sure you are getting to your clients for the accurate information they need. Following is a transcript of our conversation.
Brent Enders: Hey, Mark, we spent a fair amount of time the last few months talking about Social Security, Social Security planning and Social Security marketing. Along the way, we are also learning a lot about various techniques, strategies, what to do, what not to do, how the consumers think and feel about some of this stuff. And I know both of us happened to see the same article recently and brought it in here to talk about it. So I thought I’d kick it over to you to get your thoughts about some of the things that are happening out there and see if we can help some advisors out along the way.
Mark Mersman: Well, any good article is going to have a good title. I think that the title kind of grabbed me, and it must have grabbed you at the same time. The title is “Are advisors giving bad Social Security advice? Survey says yes.” It’s written by a Mary Beth Franklin. The gist of the article was an online survey of 400 financial advisors that was conducted from a variety of different organizations. Basically, they provided a few different scenarios, and there was one specific scenario that they reference in the article talking about a 62-year-old man and a 62-year-old female. The man was in average health and had above-average earnings. The question was basically about when should he take Social Security? And also, the other key point was that the couple had $800,000 of investable assets.
Only 20 percent of the advisors surveyed had recommended that he delay. The purpose behind a delay strategy is that obviously every year that you delay you’re going to pick up something like 8 percent more in retirement income. The article explains that this isn’t the best advice because the longer the person can delay, the longer survivor benefits — and the higher the survivor benefits will be. Statistically speaking, the wife is going to outlive the husband and leverage a higher survivorship benefit. The article goes into that, and it discusses a little bit about various claiming strategies. It really tries to point out that here’s a lot of off-the-cuff advice that our industry has probably given.
I actually still remember that within my first month in the industry, I sat down with a potential client. I was working with a mentor at the time, and his advice was, “Take it at 62.” The rationale was, “A bird in the hand is better than two in the bush.” But there was never any number crunching done, never any kind of a pros-and-cons analysis done, like sitting down with the client and saying, “Hey, here’s the outcome if we take it at 62, at 66, if we do some claiming strategies.” So, I think that there’s a lot more that goes into this, and I think some advisors who are starting to really leverage and get a ton of opportunity from this are understanding the power behind it. It’s a great opportunity. Seminar attendance and appointment requests and business that is being written off of these seminars is really pointing to the fact that there’s a dire need for this. Social Security is a major part of that.
Enders: You’re right. I think it was Ray Kroc from McDonalds who once said, “I don’t need to have a good hamburger. I need a starving crowd.” Do this right and you actually can do both. If you are well-versed in Social Security and can give out some really good, solid advice, you’ll win a lot of clients over because nobody out there is giving them good advice. In fact, there’s a lot of bad advice. If you can get in front of them, if you have a starving crowd, you’re going to do very well in this area.
Mersman: The interesting thing was that after the article, there were all the comments below it, with various advisors chiming in. To be honest with you, I actually think that it’s wrong to necessarily say that it was bad advice for them to draw early. But I think that the point that needed to be made is this: What an advisor needs to do is show the client the different options and explain to them, “Hey, here’s what this is going to give you at 62,” and walk through that, rather than just give the off-the-cuff advice one way or another. Let the client understand the different options and weigh them out.
Enders: And if you do it right, you also should be able to look at and talk to them about all their other assets. Because like this article points out, if a person waited, then they must supplement that income for five years somewhere else. It gives you a chance to talk about pensions, 401(k)s, IRAs and other investable assets, because it really is a puzzle that all kind of fits together.
Mersman: And there are about a half-dozen different software programs out there in the marketplace that will help advisors with this analysis.