Catering to the needs and expectations of the elderly can be a vastly different experience for advisors. In this article, we’ll explore the opportunities and challenges in dealing with older clients.
Opportunities
Unlike the younger generation which needs to be persuaded and taught about the importance of financial planning, older people are more informed and receptive to the advice given by planners. “The effort which goes in making elderly clients understand about products is less as compared to youngsters. Elders are focused on their goals unlike youngsters whose goals can change very often. Even advisors can learn a lot while dealing with elder clients,” says Suresh Sadagopan of Ladder7 Advisories.
Having older clients has many advantages. A majority of them tend to be close to their retirement or have already retired and would naturally have a sizeable nest egg to manage. Thus, advisors get to manage a large portfolio which can generate decent revenues. Another advantage is that you may get referrals from the same age group or their family members. “When advisors handle the investments of older clients, there is a possibility that their children too may consult him for their investment decisions,” says Vishal Dhawan of Plan Ahead Wealth Advisors.
Another benefit of dealing with older clients is their availability. A high flying CEO may not be able to give you a meeting easily which is not the case with this segment. “Many older clients are retired or working part time and thus are available for a meeting or discussion very easily,” adds Vishal.
However, this segment has its unique considerations and needs which advisors need to keep in mind. Let’s look at them in more detail:
Asset Allocation
While asset allocation would differ on a case to case basis, generally older clients tend to look for safety. Thus, advisors need to be sensitive while recommending products to the elderly as they belong to the distribution phase. At this stage, their risk appetite is less and they may be looking for a regular stream of income.
Having said that, if the clients’ investment horizon is a bit longer, there is no harm in taking some exposure to equity to get a return kicker. “Elders usually prefer traditional investment options. However, they should be educated to invest in equities to get returns which can beat inflation, says Vishal.
Suresh recommends that not more than 20% should be invested in equity.
Succession planning
While many elders continue their employment or are involved in some productive work even after retirement, they need to plan whom they will pass on their baton to. While planning older client’s succession, advisors need to involve a family member and keep them updated about the client’s financial status. Also, advisors need to nudge their older clients to prepare a will and plan their finances according to their wishes.
Nisreen Mamaji of Moneyworks Financial Advisors says that having a will is important from a legal standpoint. “Though it is important to have a nomination or second holder, it is extremely crucial that the financial plan should be in line with the will prepared. In case of disputes arising after the death of the client, the will holds more value than the nomination.”
Legally, a nominee is merely a trustee of owner’s assets and the legal heirs are the ones who are entitled to assets after a person passes away.
Provision for medical expenses
With the rising medical expenses, treatment costs can eat away a large chunk of savings of the elderly. Thus, advisors need to have a basic understanding of the health issues faced by this segment. Suresh Sadagopan of Ladder7 Advisories says, “Apart from succession planning, making provisions for medical expenses is a must. Some corpus should be saved for medical insurance.”
Maintain records
Elder clients are more informed and have an eye for detail. Thus, it is often advisable to maintain written records of each communication. Documenting assumes importance because older clients’ cognitive abilities may weaken with age. Also, documentation will help advisors be on a safer side if there are any family disputes in future.
Nisreen Mamaji of Moneyworks Financial Advisers says, “Advisors should document all calls and office visits with their clients. If possible, advisors should take a written consent from older clients for every recommendation/decision.”
To conclude, succeeding in this segment requires special skills and talent which advisors need to master.
Key takeaways:
- Having older clients will help you get sizeable assets to manage
- Involve a family member while making financial plans for older clients
- Older clients may also need some equity exposure to beat inflation
- Maintain written documentation
- Plan for their expenses to meet medical emergencies
- Plan their succession by nudging them to write wills
