Economic uncertainty has both advisers and clients delaying retirement

The global pandemic and all the economic and market fallout in its wake have rocked a large portion of financial advisers back on their heels, along with many of their clients, according to the latest research from Ameriprise Financial.

Nearly a third of advisers surveyed by Ameriprise say they've “altered their expected retirement date as a result of the pandemic.”

The survey of more than 260 advisers also illustrated how the bear market in stocks, soaring inflation and the threat of a recession are introducing new perspectives for both advisers and clients.

More than half of the advisers surveyed said they have increased communications with their clients in response to the current market environment.

Yet, even with the S&P 500 Index hovering on the edge of bear market territory, 72% of adviser respondents claim to be “somewhat confident in the overall stability of the economy.”

In terms of top client concerns and issues, the survey found that 42% of clients are shifting to more conservative investments and 29% are delaying plans to purchase real estate.

Zachary Bachner, an adviser at Summit Financial who wasn't involved in the Ameriprise research, said he has witnessed an evolution in the way clients have responded, first to the pandemic and then to the economic fallout.

“The pandemic originally caused more individuals to pursue retirement as it became difficult to adjust to the new Covid policies,” he said. “More people started looking for at-home positions, and we also saw a large increase in retirement and people who did not want to return to work.”

More recently, however, Bachner said, “the recent market sell-off and the drastic inflation have caused a reversal in this trend.”

“The high inflation has caused life to become more expensive and many have delayed retirement in order to continue earning their wages until inflation heads back down,” he added. “We have even seen some retirees return to part-time work in order to offset higher expenses. The market sell-off has been very stressful for many pre-retirees, and we have seen a lot of clients delay retirement until their accounts recover.”

For financial advisers, the issue of delaying retirement could mean stepping up the focus on succession planning, which continues to be a challenge for the industry.

According to the survey results, a quarter of the advisers who are within 10 years of retirement do not yet have a succession plan in place.

The survey found that 61% of advisers within 10 years of retirement have a plan in place and that plan has been communicated to clients. The remaining 14% say their succession plan involves selling their practice.