04.24.24
Longevity Planning, Aging and The Evolving Business of Advice
by: BISA Staff
With lifespans steadily increasing, the financial services industry faces a need for transformation. Dr. Joe Coughlin, leader of the MIT AgeLab, addressed this at the 2024 BISA Annual Convention. His keynote explored the questions advisors and executives are grappling with: How will we plan for longer retirements? What will the client of the future look like, and how can we best serve their needs?
A Life Beyond Retirement
The traditional model of a short retirement following a single career path is becoming increasingly obsolete. Coughlin highlights that the question is now not what you want to be when you grow up, but how many things you want to be. Clients are living longer, with more time to pursue passions, explore new careers and redefine themselves. This extended lifespan necessitates a new approach to financial planning.
The personality of the client is also changing. Today's client expects a holistic approach, one that goes beyond traditional financial products. They are accustomed to personalization across all aspects of life and demand the same level of customization from their financial advisor. As Coughlin explains, clients today expect that you have the expertise to make them money, but what they wonder is if you truly get them — what makes them tick? What worries them?
An Evolving Landscape
The financial services industry must adapt to meet the needs of a diverse and evolving clientele. Studies show that 36 is the new "adulthood," with many individuals delaying marriage, children and career choices. This trend signifies a shift in priorities, requiring advisors to understand the unique financial needs of this emerging demographic.
Women are playing an increasingly important role, often managing finances for families across generations. Financial advisors need to be prepared to address the unique challenges faced by middle-aged women especially, who are juggling careers, caring for aging parents and potentially navigating divorce later in life — divorce over 50 is continually common. These women require comprehensive financial planning that considers their specific circumstances and long-term goals. Additionally, middle-aged women have a major influence on their young adult children’s perspectives, including how they view finances.
Surprising to some, the digital divide is narrowing. Older adults are embracing technology, becoming active social media users and tablet adopters. However, a significant portion of this demographic (70%) believes they possess an above-average IQ and may be hesitant to trust expert advice. Advisors must move beyond simply presenting themselves as financial gurus. Building trust and demonstrating a genuine understanding of the client's goals, background and risk tolerance is paramount.
Planning for a Longer Life
Financial planning for an extended lifespan requires a shift in focus. Coughlin argues that the advisory business is now evolving to a new frontier of what he refers to as longevity planning. Advisors must work with clients to establish goals and priorities for longer lives and potentially lengthy retirement. Coughlin emphasizes the importance of asking clients about their aspirations for this extended period. The COVID-19 pandemic, for instance, served as an unexpected exploration of passions. Can hobbies translate into a fulfilling retirement that may encompass 30% of an adult’s life?
Understanding a client's vision for retirement is key. Sharing different "retirement stories" based on their circumstances can be a powerful tool. Stories resonate with people, allowing them to envision their future selves. These stories should address key aspects of a longer life, such as managing ambiguity, making big decisions, navigating complexity and considering end-of-life care.
Considering Coughlin’s five questions is essential for developing those stories of retirement:
- What will you do in your retirement? Nowadays, this is not a streamlined path. Some people return to work, go back to school or start a business.
- Who will you have lunch with? You spend more time with the people you work with than you have planned with your family prior to retirement. It’s important to know how you will make social connections post-retirement; people who live alone are at risk for health impacts.
- How will you get an ice cream cone? Essentially, what are the little things you do every day that make you smile? If you can’t drive, that could become an issue to accessing the people and things you love, which means you may be happier somewhere that you can walk.
- How will you provide care? As people live longer, adults in retirement may still need to provide care for their parents, with the oldest daughter taking on the brunt of expectations and work. How much could it cost to replace the labor of yourself providing this care? Caregiving is expensive, and now there are many new costs in retirement, such as Wi-Fi. There are also many new technologies that will make life better, but they may not be covered by insurance.
- Where will you live? This may depend on factors such as access to health care, proximity to family and personal preferences.
Ultimately, the most valuable advice helps clients connect with the resources they need throughout their lives. Coughlin concludes that people need new advice and new value; it's your job to help guide them. The financial services industry must innovate for this new reality, providing guidance, support and a roadmap for a longer, more fulfilling life.
Joseph Coughlin, best known as "Dr. Joe," leads the MIT AgeLab. Known as a researcher, teacher & advisor — his work explores how global demographics, technology and changing behaviors are transforming business and society. He was recognized by the Wall Street Journal as inventing the future of retirement, named as one of "100 Most Creative in Business" by Fast Company Magazine, and is one of Investment News "Icons & Innovators." Coughlin is a Senior Contributor to Forbes and MarketWatch. His recent book, The Longevity Economy: Unlocking the World's Fastest Growing, Most Misunderstood Market — was named a CEO READS Best Seller. Follow him on LinkedIn.