The senior market specialty has grown exponentially over the last 10 years. If you choose to serve this population, you will have to become a specialist. Here are the top five truths about serving the senior market:
1. If you deal with people in this market segment honorably, honestly, and empathetically, they will come. If you deal with them on an intellectual basis, telling them that you have a better product, service, etc., than they have right now, they will not come.
We all have access to the same products. If we concentrate on products, then we are in the commodities business. That is a bad business to be in because the person with the cheapest price always wins. Very rarely are decisions made for commodity purchases based on the personality or ability of the advisor. Cheap corn is cheaper than expensive corn no matter who is selling it.
2. Seniors do not like change. If you tell them about a better product, they may be interested, but they are very likely to take your idea back to their current advisor. Changing products is easy. Changing advisors is hard. Changing advisors requires the senior client to leave somebody who has done work for them, and that is generally not the honorable thing to do.
Their honor and desire to do what is right can work for or against you. You need to help seniors reframe their thinking. In other words, get them to think outside the box -- not just about their advisors, but about their goals in general.
3. Middle and upper-middle-income seniors are preparing for different things than the rest of the population. Chances are, they are no longer saving for retirement or their children's education. Their long-term thinking instead turns to how to spend the most money without running out of it. They are now trying to manage what they already have rather than coming up with schemes to accumulate more. Like everyone, however, they would like to have more money, but not at the risk of losing what they currently have.
They do have a sense of mortality. They realize life does not go on forever, which has a major impact on how they live their lives. They are eager to pursue their passions. They know that if they want to see Europe, they should do it now and not plan the trip for five years from now.
They also realize that they have to put their affairs in order. If they have not done so already, they must do their legal planning now for eventual death and possible disability.
However, when they consider retiring, the first thing they need to look at is whether they have enough money to retire. If they do not, they should obviously not retire yet. If they have enough money, their goals move from growth to distribution and, more importantly, to keep from losing the chunk of money they accumulated for that comfortable retirement. Growth cannot help as much as a loss can hurt. You need to help them reframe their thinking about their investments.
Seniors need to work with a retirement specialist. Why? Many advisors have tried to work with both the senior market and their general practice clients. Some agents find it difficult to change from a mindset of growth to protection and back to growth again at the flip of the switch. They often find themselves recommending great growth products to seniors, not because the seniors needed them, but simply because they are great growth products. As the most recent bear market proved, this is an easy but dangerous mistake to make.
4. Tell them about the fees -- even the hidden ones. Seniors know they have to pay for things, and they understand that there are risks. Be frank and let them know about the negative side of your suggestions, if any. Spend equal time explaining both the wonderful aspects of your suggestions and what could happen if things go wrong.
5. Seniors are experts in life. They have experience. They know the perfect investment doesn't exist. They know things can go wrong, and they know there is no free lunch. They just want you to be straight with them up front. Heaven help you if they find out the bad news after the fact and you neglected to prepare them. Seniors can be vindictive when they know they have been misled, and they will spread the bad word about you to everyone they know.
The whole truth
Working with seniors can be the most rewarding experience of your professional life, or it can be the worst experience. Why? Many advisors are rushing to this market and, as a result, seniors have become both skeptical and jaded because of the amount of attention the financial community has been paying them. If your heart is not in the right place, they will figure it out instantly.
These are some of the reasons that it's important to specialize. It's hard enough to stay on top of constantly changing tax laws and regulations for just one niche, let alone trying to diversify. You need to figure out what you are going to specialize in and do it.
Michael Kaselnak, CSA works exclusively with clients age 55 and above, educating them about and assisting them with financial matters. He is the author of "Get Their Hands Off Your Piece of Pie" and "Senior Planning for the Millennium and Beyond." For more information, visit www.pieceofpie.net or call 800-334-5350.
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