A few years ago, a trio of Citibank analysts created quite a stir when they published two memos suggesting that the American economy had become a “plutonomy” – one that is highly and disproportionately controlled by the extremely wealthy.  According to these analysts, the market is made up of only two segments – the very wealthy and everyone else.   When looking ahead to the millions of baby boomers who will be retiring in the next 15 years, it’s not hard to envision the idea of retirement turning into a “plutirement,” with two very different retirement realities facing your clients.

Beyond the 1% statistics that gave rise to the Occupy Wall Street movement, further evidence for such a scenario can be found in the most recent (2010) Survey of Consumer Finances.  According to the SCF, the mean net worth for families headed by an individual age 55-64 is $880,000, while the median net worth is only $179,000.  That huge disparity means that the amount of wealth held by those on the upper end of the spectrum exceeds the lower and middle portions by such a vast amount that they are able to pull the numbers of even those in the middle tier up by over four times.  That same basic ratio holds true for ages 45-54 and those 65-74 as well.

This basic fact brings two questions to mind:  What does this mean for your clients, and what does this mean for you?  I’ll examine the impact of this on your clients in my next blog, but for now let’s look at what this means for you.

For financial advisors, the idea of two distinctly different versions of retirement means we need to look closely at which version our clients are likely to achieve.  While the majority of advisors would presumably prefer to work with the financially elite, the reality is that the majority of clients for most advisors will be in the “everyone else” category.   That means that advisors will need to be more than just money managers, but also budget counselors, career coaches and personal advisors.  With limited financial resources, clients will want to know the impact of changing career paths, how to estimate health care expenses, and even how marriage, divorce, or simple cohabitation may benefit or harm their situation. The wide variety of needs that “everyone else” currently has and will continue to need more of is where the hard work, hard choices and true financial consulting will need to occur. 

Unfortunately, there are still way too many advisors who consider themselves money managers instead of financial planners. They still cling to the belief that the true value proposition they bring to the table is that of managing their client’s assets.  They consistently underestimate the true value of not just financial planning, but life planning.  While the wealthy will indeed need money managers, “everyone else” will need a planner.  If your client base is more in the “everyone else” category, you need to ask yourself:  Am I trained, competent and prepared to help my clients work through the life decisions that will need to be made before the financial planning can even begin?

Keith J. Weber, CFP®, CPRC, is a speaker, author and founder of Weber Consulting Group, LLC, a financial advisor training, coaching and practice management consulting firm that inspires advisors to re-examine their client conversations in order to develop deeper client relationships. For more information visit www.kjweber.com, www.RethinkingRetirement.com or connect with Keith on LinkedIn.

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