Growing Your Financial Advisory Practice
011: The Art and Science of Retirement Income Planning
June 13, 2018
Howard Dixon grew up in England and came to Canada as a W.H. Rhodes scholar in 1961. He holds a joint honours degree in physics and applied mathematics from the University of London, and he earned a Certificate of Education at Cambridge. He had a career in education before beginning his financial training as a rural agent for Mutual Life of Canada. He opened his own financial planning practice over 30 years ago in 1987, worked for two years as a senior financial consultant for MD Management starting in 1994, and became a Registered Financial Planner in 1996.
In addition to running his practice, Howard has also taught CFP courses at the University of Victoria and created a certificate-level course called Financial Plan Development. Howard joins the podcast today to discuss retirement income planning. Listen to the episode to hear what Howard has to say about the financial planning process for retirement income planning, the importance of cash flow during retirement, and why retirement planning is an ongoing process.
Topics Discussed in This Episode:
- How much effort Howard’s firm puts into retirement income planning
- The financial planning process for retirement income planning
- The types of questions clients ask about retirement
- What happens during a first meeting at Howard’s firm
- Why cash flow is so important in retirement
- How to approach showing the client how much money they’ll need in retirement
- Why retirement income planning needs to be an ongoing process
- What can be learned from a clients’ income taxes
- How to think about investment and risk
- How to approach the conversation about tapping into home equity in retirement
- How to approach insurance for someone who is retired
- The biggest mistakes advisors make when it comes to retirement income planning
Links And Resources:
Quotes From Howard:
“The most common question is ‘I’m 55, how much money do I need to retire?’”
“What I’m really doing is I’m doing a business plan for a personal situation.”
“It still startles me how many Canadians, at the age of 50, have credit card debt.”
Howard estimates that retirement income planning constitutes 65-70% of what his firm does, so you can be sure he knows his stuff. Before checking out the full episode above, have a read below where we’ve compiled some keys points from the recording:
- The art of estimation
- The two biggest mistakes advisors make when it comes to retirement income planning
For more on the topic, including identifying just how much a client will need in retirement, tapping into home equity, dealing with insurance, and more, listen to the full episode through the link above, or on iTunes or Stitcher.
The art of estimation
So, is retirement income planning more of an art or a science? You might be surprised to learn that Howard sees it at 75% art (the personal side) and 25% science (the numbers side).
As a rule, we tend to act on beliefs, not fact. You can give two people all the information at your disposal, and they will still interpret that information and act on it in different ways.
However, with experience, you can learn what people tend to do in retirement and begin to understand patterns around behaviour. Over time, you can make the entire process more predictable and perhaps even a bit more scientific.
The two biggest mistakes advisors make when it comes to retirement income planning
With all his experience in the field, Howard has seen some pretty big mistakes. The following top his list:
1. Lacking appreciation for the way tax works
You might be thinking, “No surprise there!” It can be hard to keep up with ever-changing tax laws.
However, taxation is usually employees’ biggest expense, so you can hugely impact a client’s financial situation just by helping them save on taxes. It’s simply the most efficient way to find some extra money to invest, and it’s one that you may be missing out on.
It’s not just about saving money, though. When Howard was just starting his business, he first sought out clients by offering income tax help; to this day, Dixon, Davis & Company still file income tax returns for clients who want the service. Howard recommends it because doing someone’s taxes can really give you a complete picture of how they’re investing their money.
Hint: If you’re not offering this already and you’re able to, try offering this service to clients, and let us know about the insights you gain!
2. Telling clients what to do
Howard sees financial planners as similar to doctors in many ways. When treating patients, doctors never suggest a single course of action. Instead, they outline all available options, lay out the pros and cons, and let the patients choose.
Sure, there will be situations where you feel you know what’s best. But, coming back to the idea that retirement planning is often more of an art than a science, there’s very rarely a single correct option for a client. Even you are coming into the process with your own philosophy and biases, and despite your expertise, you can’t make a choice for your client.
Hint: This is especially true when making big, permanent decisions; an ideal financial plan is flexible, so tread carefully with irreversible options like annuities.
Howard likes to say this to clients: “Thinking the way you think, and knowing what I know, here’s what I suggest you consider.” Give clients the information they need, and then let them make an informed decision according to their philosophy.
Hint: On the topic of client philosophy, you’ll likely find that as you grow your practice, you’ll eventually be in a position where you don’t have to accept every client that comes your way ‒ you can select clients based on how well their philosophy aligns up with yours. John Page covered this idea of client fit in our fourth episode, Conducting Your First Client Meeting in a Way to Maximize Conversions.
We hope you enjoy this episode with Howard, which you can hear by clicking the link at the top of this page. To make sure you never miss an episode, subscribe to the show on iTunes or Stitcher, and sign up below to receive an email every time a new episode goes live.<<< Back to Growing Your Financial Advisory Practice