Investors value advisers, especially when retirement is looming

Panel at InvestmentNews conference tells of unexpected health care expenses, little interest in leaving large inheritance

By Darla Mercado

May 12, 2014 @ 12:42 pm (Updated 5:29 pm) EST

Investors on <i>IN</i>'s retirement panel.
Investors on IN's retirement panel. (Matthew Bleistein)

As difficult as the client-adviser relationship can be at times, a panel of investors agreed that their advisers are an essential part of their retirement planning.

A group of five investors participating on a panel Monday at InvestmentNews’ annual Retirement Income Summit in Chicago noted that the importance of having an adviser is especially keen when retirement is right around the corner.

“Even though I had a financial planner go through a planning exercise close to 15 years ago, and I was reassured about numbers and allocations,” said Alan Channing, 69, and soon-to-be-retired chief executive of Sinai Health System, “I was still in denial.”

Mr. Channing will be hanging up his boots in six weeks. Suddenly, the future seems more tangible.

“Now this sense of reality sets in and my need for guidance in a more precise way from folks like yourselves becomes more intense,” said Mr. Channing.

Saving for retirement is the biggest focal point for clients and advisers. A recent survey of about 800 investors from the Insured Retirement Institute found that of the 476 participants who have advisers, 83% of them indicated that retirement savings was the issue most commonly discussed. Retirement age followed in a close second, with 80% of the vote.

Health care coverage and Social Security claiming strategies were near the bottom of the list, as only 43% of participants said they discussed health insurance with their advisers and 41% covered their bases on Social Security.

There are very real ramifications for not making clients aware of how their health expenses will come into play at retirement.

Investor panelist Ron Sempetrean, 81, and a retired insurance agent, noted that he and his wife are paying more than $9,000 a year for Medicare and supplemental coverage. In 2013, alone, their medical bills reached $21,000.

“That’s the only hole we have in our [plan]; we didn’t expect it,” he said.

Investors tend to overestimate their ability to cover health care expenses in retirement, according to the IRI’s research. Fully 55% of investors said they were confident they’d have enough money to handle their medical costs. Meanwhile, 41% were confident they could fund their long-term care costs.

Leaving a large inheritance was either “very important” or “somewhat important” for only 56% of the polled participants. Among the panelists, most seemed to favor leaving a small parting gift.

“I don’t live as if my purpose is to leave an inheritance,” said Vickie Austin, 57 and a business coach. “Our children are very resourceful, and we’re very proud of them.”

Mr. Sempetrean agreed. “I’m going to leave the kids enough money for their financial garden -- that’s all they need,” he said. “There’s too much enablement today. You have to make [the children] want, need and focus.”

Interestingly, the participants didn’t attach a lot of importance to how their advisers are paid. Rather, they sought transparency, trust and are willing to pay advisers what they are worth.

“It strikes me that we are heading for a fee-type business,” said Greg Nie, 59, and a former chief technical market analyst for broker-dealers. “But I’ll offer up another nugget from my dad, who was in the shoe business: ‘If we have an electrical problem, we hire the electrician and we pay him. We pay a plumber if we have a plumbing problem.’

“ You find a good professional, and he is worth what you pay him,” Mr. Nie said.