In early 2001, Ed and Barbara Swanson wanted reassurance that they would have enough money to live on through retirement.

The suburban Chicago couple found it by developing their retirement plans with Raymond James advisor Mike McCormick. By working closely with him, the Swansons became confident they could achieve their retirement goals, though their confidence has been tested by the ups and downs of the market.

"Honestly, when we leave Mike's office, we are confident that we've got enough money," says Barbara Swanson, 75.

Unfortunately, many investors say they don't share the Swansons' confidence about making it through retirement, according to advisor accounts. And advisors increasingly find themselves reassuring clients worried about the risks and changes they face during retirement.

"I've had some clients for 30 years. Someone I had 30 years ago wasn't interested in this stuff. Now it's a different story. It's a distribution world, not an accumulation world," says McCormick.

Experts say the economic upheavals of the past decade have left their mark on clients.

"We've been through two roller coasters. You go back to 2001 or 2008. I lost, like most people, almost 40% of my portfolio [during the financial crisis]," says Ed Swanson, 76.

He adds, "My instinct there was to figure out if I should pull out. ... I was asking, 'What the [heck] are we doing?'"

With headlines screaming financial chaos, the Swansons had many conversations about their tolerance level with McCormick. In the end, they didn't panic and pull out. They were reassured about their retirement plans — and still are today.

Joseph Nadreau, head of innovation and strategy at Wells Fargo Advisors, says many investors suffer from a disconnect, pointing to two data points in the survey. When asked how they would save or invest if given an extra $10,000, more than half of investors said they would keep it as cash. Meanwhile 67% of investors claimed to be knowledgeable about investing, yet only 7% actually knew that the markets had an average return of 30% in 2013, based on S&P 500 returns.

Nadreau attributes investors' conservative attitude toward investing in part to the legacy of the financial crisis, which devastated portfolios.

"I'm the poster child," he says. "If I told you I didn't have more cash in my portfolio than in 2007, I'd be lying. I have my Series 24, I have my M.B.A., but I also have an advisor. And I have an advisor for that irrational component."


Image: Mike McCormick, vice president investments and retirement planning consultant at Raymond James & Associates. Photo by David Jackson.



While instincts may verge at times on the irrational, based on inaccurate understandings of the markets, investors' reasons for being worried about retirement are also partly based on real risks, experts say.

"There's a big penalty to be paid for mistakes. It can be overwhelming," says John Diehl, senior vice president for strategic markets at Hartford Funds.

Moshe Milevsky, professor of finance at the Schulich School of Business at York University in Toronto, says one of the primary drivers for clients' concern is the randomness and uncertainty about how long one's life may be.

"I think that's the big change, the longevity risk," Milevsky says. "It's actually getting wider for people who reach the age of 65 compared to where it was 100 years ago. That's the scary thing. I may live 35 years [more] or not."

That uncertainty makes long-term planning difficult, notes Milevsky, who has authored several books on retirement topics and annuities, including, "The Calculus of Retirement Income."

Complicating matters further for many, entering a new stage of life can be disorienting.

"You've lost your traditional source of income," Milevsky says. "You have an anchor every month because you have a paycheck. You can say, 'Oh, that's too expensive because it's bigger than my paycheck.'"

Many clients — no longer tethered to that anchor — are afraid they'll be hit in the midst of their retirement by a wave of rising costs, from health care to inflation.

Diehl, who regularly presents on topics such as aging clients and retirement, suggests that half of an advisor's job today comes down to psychology.

"[Clients] are expecting more emotion and more empathy," Diehl says.

He adds, "We can't just ask our clients what their hopes and dreams are because they might not have thought about it. You need to get them talking."


One way firms are helping to bridge the conversation between advisors and clients is through technology. Platforms like Wells Fargo's Envision and Merrill Lynch One, which launched earlier this year, are providing starting points for advisors to get clients talking about their retirement needs, dreams and fears.

At Raymond James, advisors hail the utility and interactivity of the firm's Goal Planning and Monitoring software, which launched in 2012 after six months in development. GPM, as it's known, enables advisors and clients to paint a picture of what retirement looks like.

"The important part of this, in the early stages of the planning, we want to know everything that in a perfect world they could do. We're looking at maybe a 30-year retirement here and we want to help them get through that," McCormick says.

First, client data such as assets (at Raymond James or elsewhere), income and state of residence is entered into GPM, followed by expected expenses (e.g., health care, philanthropy, travel). Clients can rank these on a scale of importance, from needs to wants to wishes.

Next, advisors perform a risk assessment with clients who express what they think their risk level is. Advisors can then demonstrate what would have happened during the financial crisis to a hypothetical portfolio modeled along the lines of someone with a similar risk tolerance.

Advisors say this "what if" stage often leads clients to reevaluate. Some dial back their ambitions, while others realize they can be less conservative in their approach to planning their retirement lifestyle.

"What we're trying to do is show what risk really means to them," says John Catalano, director of advisory process and planning software at Raymond James. "We feel this is a great way to get them to respond."

Spouses perform this process separately. Advisors say it can be eye opening, causing some couples to talk with each other about what's really important in retirement and a comfortable risk level.

"The needs are easy but it's the 'wants and wishes' where you have that discussion. If the needs are a challenge, then it's time to loosen the tie. But we rarely see that," McCormick says.

Finally, they see the results, which show how likely clients are to achieve their retirement goals. Advisors and clients can use a GPM feature called "play zone" to see how changes to saving and retirement spending affect those goals.

Need to dial back your ambitions? Then perhaps see how buying a Kia instead of a Lexus can help get you there. Or maybe the results indicate that you can loosen your belt and take an annual trip to Paris.

"Once we can show them how much they really need to set aside for their own needs, then it really does open up the possibilities," says Daniel Dawson, McCormick's partner.

Software programs like GPM have eased that process. "The beauty of it for me is that I've always been doing the financial plans, but it was such a paperwork hassle. ... Now you just sit down in a conference room and hash it out," says Tuffy Wood, a CPA and Louisville, Ky.-based Raymond James advisor.

The result, advisors say, is to demystify what retirement could look like, illustrate the variety of possibilities and provide clients an anchor going forward.

"My goal is not to have them waking up [in the middle of the night] reading Barron's and watching Bloomberg to see if they're on the right path," Wood says.


Advisors and experts note that retirement planning doesn't really end when retirement begins.

"If you think about retirement being a 30-year period, then you're definitely going to be making adjustments along the way," says Scott Thoma, retirement strategist at Edward Jones.

For example, withdrawal rates are a starting point, not something to be locked in and never adjusted, Thoma says. And by identifying expenses and classifying them into wants and needs, advisors and clients can see where adjustments can be made if necessary.

"Sharing the information is much more empowering for the client. After going through '08 and '09, people understand that that can happen. They want to know that the advisor is going to plan for this and going to help them with this," he says.

Thoma notes that research on investor behavior during the financial crisis showed that many of those who derived or intended to derive a greater source of their retirement income from their investments were more likely to want to pull out entirely from the market.

"They wanted to make changes and sometimes dramatic changes that could be the wrong move at the wrong time," he says.

McCormick's partner Dawson has found that clients are more likely to panic when they're surprised.

"We talk to them about what to expect from the markets and what that means in terms of their retirement lifestyle. If you don't have very well-articulated goals, then it becomes much easier to panic about getting out of the market. But if you define those very clearly, it's easier to stick with it," Dawson says.

McCormick emphasizes the importance of the interactivity of the planning process, which reinforces that the retirement plan is a "living, breathing thing."

"It's not a 400-page document that they are going to put on the shelf with the other things that they never look at," he says.

For their part, Ed and Barbara Swanson transitioned into retirement as they approached age 70. The couple regularly meets with McCormick and his team to review their retirement plan. With their aid, the Swansons have made adjustments to the plan, making renovations to the house where they have lived for 47 years, and also setting aside money for their son.

Barbara says they probably would not have done the work on their home had they not been reassured by McCormick's retirement planning.

"I probably ask him the same questions every time we see him," says Barbara, laughing. "But he's always open and makes sure I understand what is going on."

Image: Ed and Barbara Swanson, clients of Mike McCormick. Photo by David Jackson.



McCormick has even extended retirement planning to the way in which his advisor team is structured.

 "I'm 61 years old, and [clients are] looking at me thinking, 'Well, you're not going to be here in 30 years.' I have Dan, a CFP, who is 31 years old. He'll be here in 30 years. My son is on the team, studying for his CFP; he'll be here in 30 years. So [clients] see that and have a lot of confidence that we will be with them for years to come," McCormick says.

Indeed, retirement planning is his niche, McCormick points out, noting that early in his career he was not enamored of stock picking. Advisors today, he adds, have an opportunity to prepare clients for their next phase in life — and get them in a position to enjoy their golden years without worry. "At the end [of the planning process] one of the things we invariably say is that we now give you permission to not worry about outliving your money," McCormick says. "It's kind of a joke, and we all get a laugh. In reality I can't guarantee that. No one can. But you do see a look of relief. That's wonderful. I love that." 


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