My wife had her car serviced a few weeks ago, and the dealer provided us with a brand new car to drive for a couple of days. One of the features I really appreciated was the blind spot protection. We all know how hard it can be to see oncoming cars when backing out. When I pulled out of a parking spot, even just a couple of inches, and a car was coming, it would provide a useful warning.
That got me to thinking about the blind spots retirees and those preparing for retirement will often face. There are many ways a person’s finances can end up going in a direction they never intended to go in, causing them to crash into things they never saw coming. An excellent advisor can serve investors by becoming their blind spot sensor. Advisors do that not by increasing the information load, but by sifting through it for the client, and letting them know what is coming in terms they can understand.
The best example of where an advisor looks to see where a client is heading in advance and provides a warning has to do with retirement spending. If a person is spending too much today and it will cause them to run into problems down the road, an advisor needs to step in and like that blind spot indicator on a car, provide a useful warning about what is coming. Most people will heed this warning and make adjustments to avoid running into problems, all an advisor needs to do is provide them with multiple ways to do so and let them choose.
The opposite could just as easily happen. If a person or couple is not spending enough in retirement, they may be doing so with the end result that they leave their kids twice as much money as they ever intended to. Or perhaps they are taking on more fluctuation in their portfolio than they need to accomplish all their life goals. It is an advisor’s job to see these issues in advance and let the client know where they are heading so they client can adjust accordingly today.
For example, when it comes to the question of asset allocation, we usually provide our clients with two or three allocation scenarios, along with the impact of that choice two levels. At one level is the impact on their lifestyle. They can quickly determine whether there is a benefit to one allocation vs. another, in terms they can relate to such as how much they can spend in retirement. At the other level, we show the ending estate values of differing allocation strategies. A typical scenario would show a client that for example, if they moved from a 40% allocation to equities to a 60% allocation to equities, they might leave 50% more to someone they love, or an institution they love.
I often tell clients that we don’t make decisions for them, we provide them with a simple process and relevant information which allows them to make deliberate decisions. It is through this process that any blind spots become apparent and the path to take to avoid any obstacles becomes clear.
Blind spots are an inevitable part of retirement and financial planning. If you want to know about potential blinds spots in advance, but struggle with the information overload and fear making financial decisions, you just might want to hire a trusted advisor to be your blind spot sensor.