Big miss: Advisers seldom discuss retirement living arrangements with clients

Housing discussion an opportunity for advisers and important for clients, Legg Mason says

Jan 13, 2014 @ 12:16 pm

By Liz Skinner

+ Zoom

Few financial advisers talk to their clients about their future housing plans, even though the financial implications of such decisions are huge. And by not doing so, they are missing a big opportunity.

Only about 14% of advisers have helped their clients create plans for their housing during retirement, such as downsizing, moving to a retirement community or arranging for long-term housing and care, a new survey of 506 financial advisers found. Legg Mason released the survey Monday.

That's a surprisingly low number, given that 36% of income is typically spent on housing during retirement, according to the Bureau of Labor Statistics.

About 40% of advisers said they don't help their clients plan for retirement housing because clients don't ask about it, the Legg Mason survey found. About 26% of advisers who don't help clients with this topic said they don't feel knowledgeable enough to discuss it.

Kathleen Pritchard, Legg Mason's head of adviser business development and a managing director, said clients aren't asking about it because they don't understand the “extraordinary financial impact” that future housing choices can have on their retirement savings. Costs can quickly outstrip savings if retirement housing isn't planned for carefully, she said.

“Planning for the financial implications of housing choices should become a much higher priority for aging investors and their advisers,” Ms. Pritchard said. “It's also a great financial planning opportunity for advisers.”

Having this conversation will elevate the whole financial planning discussion and thus create additional revenue and referral opportunities for advisers, she said. It also can “build a bridge” to the next generation.

Clients who have a plan for their housing needs and choices “can maintain control of the discussions and maintain their sense of dignity,” Ms. Pritchard said.

Anytime advisers have in-depth financial planning conversations with clients about retirement, the discussion should include housing options, she said. Even clients who remain in their homes need to plan because they will need to make it “age safe.”

Advisers are talking more regularly to clients about other aging challenges, according to the survey.

About 65% of advisers help clients with retirement savings, 34% help to pass on funds to future generations and 24% help with retirement goals, such as “bucket list” items, the Legg Mason survey found.

Even though most advisers don't talk to clients about it, advisers expect 27% of clients will downsize from their home when they are about 70, a quarter will move into a retirement community at around age 74 and 22% will settle into a facility with medical care at about 79 years old, the survey said.

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