Managing expectations is more important than managing money

By Lou Aarons

Delaware Valley Financial Group

We all want to do what is best for our clients. It’s a simple statement and it really boils down to understanding your client's goals and helping them get there.

There is an old saying: “Life is a journey, not a destination.” Many of us who help clients manage their assets and their income are so intently focused on the destination we forget about the journey. The journey is where our clients live every day. I firmly believe that if we make sure the journey is properly managed, reaching the destination is assured. Translation: Managing expectations is more important than managing money.

As we get older, we gradually transition from accumulating money (under age 55) to protecting our money (ages 55–65) and ultimately, to using our money (retirement). Expectations are different at each stage. As obvious as that sounds, many clients are so busy with work and family that they completely skip that middle stage. This “lost decade” has dramatically impacted the retirement plans of millions of Americans who realized too late that their nest egg hasn’t taken them far enough. It’s one thing to deal with the emotional strain of a poorly performing portfolio. It’s another thing entirely to get a part time job or delay retirement for years because of that poorly performing portfolio.

Would you like to feel good about the job you are doing for your clients? Put them in a position to transition to retirement financially stable and emotionally comfortable. That makes getting an extra 1 percent rate of return seem insignificant, doesn’t it?

To accomplish this, we need to remind our clients about their changing expectations. You should have a strong, in-depth discussion about retirement thoughts with every client between the ages of 50 and 55. An action plan should be developed, laying out the steps necessary to achieve those retirement plans. Hoping for market performance to get you there is fool’s gold and I argue that simply adjusting asset allocation to be more conservative doesn't eliminate the risks, it simply reduces the risk that you can’t retire on your own terms.

Don’t hesitate to utilize fixed and indexed annuities as part of the plan to reach those retirement goals. They provide growth opportunities appropriate for a client with little or no risk tolerance. Available income riders can guarantee a future lifetime income stream, and it can be structured to increase directly with inflation. There are even riders that refund the rider fee as part of the death benefit on the account. The bottom line: The tools exist to ensure your clients can retire when, and how, they want.

Talk to an expert about how to utilize these annuity products for your clients. Learn about them and understand them. It could be the best professional decision you ever make.