Financial Planning in Your Later Years

Transcript:
Alanna Petroff: This video is part of a series about financial planning for different life stages. I am joined now by Nick Cann. He is the chief executive of the Institute of Financial Planning and we're specifically going to talk about financial planning for your later years.

So, Nick, let's review what does this mean by financial planning in your later years? What does this entail?

Nick Cann: Well, later years has changed significantly now as to how that's perceived by people. Years ago, you used to retire at 65 and then die at 70, that was pretty much it. You have annuity three or five years out, that was it. Demographics, lifestyle, everything has changed significantly now. People have to be far more flexible with when they retire, and they are going to live in the main an awful lot longer.

So, for some people, they are planning for potentially 30 years after retirement, which is a huge amount of time to make capital or pension last to be able to achieve financial goals. So, we would advocate now, if people haven't had professional help at this stage, a financial planner to help them, they should really consider taking that option just to see where they are, and what opportunities they have, what chance they have of maybe achieving those objectives into their retirement.

Petroff: So, let's say that you have never been to a financial planner before. You've been trying to manage your own money and asset allocation all the way through, and now, you think, ‘okay I'm hoping to retire in the near or mid-term, and I'll go into see a financial planner,’ what should that conversation look like when you go in?

Cann: Well, it's a good question. You used the words there ‘I hope’, which is, in a lot of cases, where people are right now because they don't know. Because they've hopefully done some really good strategies, and they've done some good investments and they've done even without advice might have done really well with how they saved in the past.

Now, it's crucial because if they are thinking about giving up work and a known income stream, they have to rely on their existing capital to survive them, their family and do all the other things they want to do in the future. So, their expectation would be going to see a financial planner, and in particular accredited financial planning firm, which I have some understanding, is that they will go through a very long fact-finding process: understanding the people, the family, what's drives them, why it's important to retire or not to retire, before they even start looking at the finances.

Petroff: Okay.

Cann: Having looked and understood what they are trying to achieve, they will then look at the finances. They will look at the cash flows and the implications of people, as to whether they can retire now, whether they are likely to last till 80, 90. And if not, what sort of strategies they might take to help them do what's important to their client and to the individual.

Petroff: Now, what about for someone who has done well in their investing, and they say ‘I want to retire at 60. That's the goal.’ What would you say to them?

Cann: I wouldsay excellent. A, you have a goal, and you want to retire at 60. You would probably challenge them as to why they want to retire at 60, and perhaps ask what are they going to do for the next 20 or 30 years? Because sometimes busy professionals, busy entrepreneurs, they have been so busy in their workplace that they have no hobbies. So, they have got nothing to do, and they might annoy their husband or wife as just about as soon as they retire after week one because they are bored.

Petroff: Okay.

Cann: So, part of the importance of planning is understanding what drives that individual and what is important to them when they retire. And therefore trying to work with them as to strategies. Some people start to perhaps go into things like philanthropy, other areas which are important to them where they can still be involved without necessarily being out five days a week.

Some people will want to do some more of their own investing, perfect, as long as it is in their strategy. Some people want to do a whole range of different things. The importance of working with a financial planner is they can help them; A, work out whether that's possible, and; B, keep that under review on an annual basis to make sure they are still on track.

I think as customers, as consumers, all we really want from an advisor relationship is that trust and ability to understand that we are still on track. We are not necessarily so bothered where everything is, we trust the financial planner to deal with that. It's that conservation and the knowledge that we can do all the things we want to do and have some fun.

Petroff: Okay.Is there any one characteristic that you think that people should have when they are approaching their later years, when they are in their later years. Would it be flexibility, would it be surety and steadfastness like, what do you think would be a good characteristic to have?

Cann: Flexibility is important, but I think the worst thing that I get fed back from financial planners is they work with clients who are worried about spending money. They are worried about having fun, they are worried about passing money onto children because they are not sure, they don't have that context. And the big release that a financial planner can work is to explain to them that irrespective of whether this, this or this will happen, they still have enough money to pay their bills, and survive and do the various things they want to do until whatever age they agree is a reasonable age to do that.

I think that's the biggest thing with flexibility, understanding, and a proper dialog, is that ultimately people are going to have far better lives as a result of having senior financial planners. It sounds very grand, but ultimately that's the feedback you get from clients or financial planners because they are worried. They don't want to spend just in case, not sure, don't have context. That's what a financial planner gives them.

Petroff: Okay, great. Thank you very much for joining me. That was Nick Cann, and he is from the Institute of Financial Planning.