From robo advisers to nearly everything online and mobile, retirement planning and financial services are undergoing a technological revolution. Yet there is one aspect of retirement planning that isn't experiencing any innovation at all – the retirement story.
Technology, in its basic form, is the use of knowledge to solve a problem or to accomplish a task. In that light, the ‘story,’ and more precisely, storytelling can be viewed as a technology. The story is perhaps the oldest way people understood the world.
Stories are the ultimate client engagement technology – they explain cause and effect, provide meaning, portray the range of alternatives in any given situation and help people understand why they should take one action over another.
While the context of retirement has changed dramatically, the story of retirement has not. The traditional retirement narrative goes something like this: The protagonist is most often a man, sometimes a couple. A lifetime of work is punctuated with a clear end date and captured by the image of an office retirement party. Today’s retirement story presents life after work as a reward for decades of 9 to 5 hours and long commutes. The reward is time – earned time to relax. The feeling is all about freedom, although the choices reflect a narrow range of sunset beach walks – sometimes mixed with an occasional bicycle ride or golf course view. Our happy retiree, perennially tanned and youthful, is sometimes mixed with equally happy grandchildren, at a resort or on a theme cruise.
This story is not altogether incorrect, but it is woefully incomplete.
Today’s retirement story fails to capture the differences of the next generation retiree and the context of their life. For example, while there is often a male figure portrayed as planning for the future with an adviser, this story narrative ignores the vast number of baby boomer and Gen X women that have their own careers. Moreover, women, not men, are most likely to be the primary consumer and caregiver of the household, making them the most knowledgeable on what future financial demands are likely to be.
Other realities missed in that traditional view include lower fertility rates and gray divorce. With fewer children per family than previous generations, future retirees will have fewer adult children to provide physical, emotional, social or financial support in older age. Even retirees with offspring may find that their adult children live many miles or time zones away. According to Merrill Lynch, the divorce rate for people over 50 years old has increased an estimated 700 percent since 1960.
Wait, how many years is that?
Unlike past generations, retirement is no longer a relatively brief period at the end of our lives. Indeed, for those with greater education and income, there is likely to be an even greater period of well-being in retirement giving far more time to do more than walk an endless beach. According to the World Health Organization an average person in their early 60s today is likely to enjoy nearly 20 healthy life years still ahead of them.
The difference is that previous life stages have compelling examples and clear stories that guide and engage us through the decades.
Here is some basic math about time, not finances, in retirement. If we assume that a person with some or more college education and good income is now likely to live to about 85 or 87 years old – their life can be divided into four periods averaging nearly 8,000 days each. Birth to college graduation is about 7,700 days. College graduation to midlife crisis at about 45 years old is another 8,700 days. Midlife to the retirement age of 65 is another 7,300 days. And, add about another 8,000 days from your retirement party to life’s end. In sharp contrast to retirement being a brief period of relaxation and reward, it is an entire life stage waiting to be invented.
It's often asked, ‘what will you do on day one of retirement?’ Most people have a clear image of day one. Maybe even day 1001. But few can imagine 8,000 days of golf and even fewer have a vision of what they will be doing on any given day – such as day 4,567 of retirement.
Although retirement planning has not caught up to the realities of an 8000-day retirement, today’s client appreciates the daunting challenges associated with planning an entire life stage without example or storyline. This inability to envision their future self not just years, but decades in the future is surrounded by ambiguity not alternatives.
Consider the first three 8,000-day life phases. Each of those phases prior to retirement has products, services and real examples for consumers to follow. There are clear stories to guide people from childhood into college young adulthood. Life after education into career may be fraught with anxiety, but there are paths to follow and even entire mentorship programs to help develop a career.
Moreover, there are entire industries devoted to guiding and even enticing certain choices and behaviors from apartment living, wedding planning, home buying and furnishing, to child rearing right up to retirement day. Think about home buying, it is rarely about the home’s specific features alone, rather it is the lifestyle the home offers, the feeling of living in a given community and so on. Home developers enable the buyer to see themselves in the home and tasting the backyard barbecue.
The auto industry does not just sell a car, it sells the promise of an experience on the open road, how the car can be used, what the car says about the owner, enabling the buyer to see herself in the driver’s seat. Widescreen TVs are sold by telling a story of friends, nachos and football. Retirement planning and financing, however, may be the only industry that tries to sell ambiguity to a consumer.
Advisers ask clients what are their objectives in retirement? This may be noble, but it is also daunting. So daunting that many people delay or simply choose not to plan. Few people at 21 years old know what they are going to be doing at 45 and fewer at 45 know what they will be doing at 65. Yet, we ask clients at 45, 55, and 65 years old, what are their objectives in retirement rather than portraying for them the real possibilities, lifestyles and associated costs.
The new value of retirement planning and the business of advice will go beyond transactions and intelligent financial planning algorithms. The future of advice includes the crafting of retirement stories that engage the imagination, emotions as well as economic sensibilities of the client. Advisers will co-create with clients a story of retirement that people can realistically see themselves as the main character. Retirement advisers will maintain their core competency and value as financial experts but will evolve to serve as curators of the options and costs of various lifestyles in a yet largely uncharted life phase of 8,000 days.