How could I possibly say that our industry’s most sacred customer conversation cow – RETIREMENT – is a stupid conversation for customers? Here is how…
Financial Professionals Have Never Retired Themselves
Have you ever stopped to consider something patently obvious; that overwhelmingly the financial professional proffering retirement advice to our customers has themselves never retired? This is like being given advice on how to ride a bicycle from someone who has never ridden one. It is entirely possible to describe technically, scientifically, and even mathematically how to ride a bicycle. That, however, does not guarantee balancing ourselves on two wheels as we pedal like mad to stay upright.
Retirement is Far into the Future
According to the U.S. Social Security Administration for children born in 2015, their life expectancy is 78.5 years, 76.04 years for boys and 80.99 years for girls. On average most people retire at age 63 and have an average of 18 years of retirement, according to The Balance. If we assume that most people begin saving for retirement at age 25 then that means on average that retirement is an event that occurs 38 years into the future.
Meanwhile, in the intervening 38 years, and starting even before age 25, our customers experience many dozens of important financial events in their lives. For example:
• Attaining a college degree
• Attaining an advanced degree
• Changing careers, perhaps more than once
• Buying a car
• Starting a business
• Getting married
• Losing your job
• Failing at a business
• Birth of a child or of children
• Getting divorced
• Taking a sabbatical
• Unexpected medical expenses
• Buying a home
• Buying a second home
And on, and on, and on. Each of the preceding named events has large financial effects for customers.
Is retirement an important conversation and one where it is important to begin saving at the earliest? Absolutely. But is this the only financial conversation that our clients care about? Absolutely, not. Yet, our industry is structured almost entirely for one and only one penultimate conversation: retirement. Why?
Retirement is for the Investment Industry, Not Customers
Retirement is a conversation that the investment industry cares about on a daily basis much more so than do our customers. Strong evidence that our industry does not speak the financial language of our customers is that remarkably few people (just 36%) are prepared for retirement, the very conversation we harp on so much. Argh!
So, let us stop for a moment and imagine the perfect customer conversation for the investment industry given that markets are volatile and its returns unpredictable over short time frames. Why, it is retirement of course, and as enabled by conversations in support of it, “start as soon as you can,” “dollar cost average,” and, “do this forever.” Retirement ensures we have a largely unquestioning client and for a very long time. A drug dealer seeks the same things. Someone who starts taking drugs early, takes drugs routinely without question, and takes drugs forever. Which brings me to my next point.
Services, Not Products, Damnit!
The hidden reason for how all of this happened is because the investment industry established business models that favored transactions and products over services. That is why above “saving for retirement” is analogous to “smoking cigarettes.” We need to sell as much product as possible, for as long as possible, in order to make money. Had our industry maintained its professionalism (i.e. avoiding productization) then it could earn money from offering sound advice about the financial events named above and that our customers encounter on a daily basis and for decades, well before retirement.
Going forward, I dare our industry, the investment business, to begin to navigate back to the real financial lives of our customers. Let us switch from a product orientation to a service orientation. Our businesses, and better, our customers will thrive forever more.