The bucket strategy is growing in popularity as Americans seek ways to ensure their hard-earned money will last throughout the entirety of their retirement years. This second installment of a three-part series on the bucket strategy explores how advisors should approach the strategy to generate more business. I have seen firsthand how The Retirement Analysis Kit (TRAK), our flagship software solution, helps advisors actively engage and educate their clients.
Financial advisors spend much of their time managing people. Successful advisors know how to listen, identify core needs and concerns, and create a plan that encourages engagement. Once trust is built, advisors can use their knowledge of finance, market trends, and historical data to position clients to make wise decisions.
The bucket strategy is a great solution for many clients planning their retirement. Understanding how your clients perceive risk will help you present the strategy in a way that wins their business. Ask questions that help you ascertain their relationship to risk, which will guide you in introducing the strategy. Let’s focus first on those who are extremely risk averse, and then on those who are risk prone.
These types of statements may indicate your client is risk averse:
“I need to know I/we are taken care of.”
“I like guarantees.”
“I prefer to play things safe.”
“Most of my investments are in money market accounts.”
“Market unpredictability stresses me out.”
“I like control.”
“My parents/friend/cousin/co-worker lost everything in the market crash.”
These clients are typically more conservative and prioritize protection against the risk of market downturns. Tensions arise when you convey that those same assets need to last throughout their full retirement. Implementing the bucket strategy balances these two needs, making it easy for advisors to show clients the benefits of using income buckets as a retirement income strategy.
Begin by emphasizing how the strategy can provide for the first several years of retirement with very low risk. The psychological benefit of having a secure, immediate future gives the advisor more latitude in managing the rest of the client’s portfolio.
These types of statements may indicate your client is risk-prone:
“I like to manage my own investments.”
“I have a good feel for the market.”
“How bad could it be?”
“I love the thrill of adventure.”
Risk-prone clients may initially resist the bucket strategy because it does not use all assets for aggressive investments. Begin by emphasizing the positioning of the last bucket to potentially earn higher returns while refilling the other buckets. Then use your knowledge of current and historical market trends to make a case for using the bucket strategy. Clients can still benefit from market highs while protecting themselves from inevitable downturns. Use personal experience or the stories gleaned from your risk-averse clients to help your risk-prone clients formulate a more accurate picture of what to expect in retirement.
Regardless of where your clients fall on this spectrum of risk aversion, opportunities to inform and educate on retirement topics arise naturally when discussing the various buckets and stages of retirement. Clients who understand the implications of longer life expectancies, the changing retirement age, unexpected medical bills, decisions about when to take Social Security, and their desired financial legacy are better positioned to retire successfully.
Grow Your Business
The bucket strategy presents advisors who use TRAK further opportunity to differentiate themselves as retirement specialists. Look for client’s who’s mindset is transitioning from wealth accumulation to the distribution of their assets. With your assessment of their risk tolerance in mind, introduce the bucket strategy and watch them actively engage in planning their approaching retirement.
The American Association of Retired Persons claims that 10,000 baby boomers are turning sixty-five every day! Regardless of the retirement plan market you are in, there are potential clients with retirement planning high on their priority list. I believe the bucket strategy will prove to be an effective method to grow your business!
Our goal at RetireReady is to provide the solutions you need to confidently and successfully meet your clients’ needs. We offer the tools needed to listen to and then educate those pursuing a successful retirement.
I wish you the best as you implement the bucket strategy and help Americans successfully plan for their retirement. Part Three of this bucket strategy series will explore how to use TRAK to develop, manage, and illustrate the strategy for your clients.