Could This Income Planning Software Keep Widows From Firing Their Advisors?

What You Need to Know

The research is clear: Widows who were neglected by their financial advisor will find a new one.
Women, and plenty of men, have needs for income protection that advisors aren’t meeting, David Macchia says.
He suggests that sophisticated planning technologies are needed to develop retirement income plans that meet those needs.

If there is one stat that should be keeping wealth management professionals up at night, it is this: Around 70% of widows fire their financial advisor — in large measure because the advisor never bothered to develop a relationship that went beyond the male spouse.

The exact termination rate varies depending on which survey one cites, according to David Macchia, the author and retirement income planning expert who founded Wealth2k, which provides what Macchia argues are among the best advisor-centric income planning solutions in the game.

Irrespective of the specific survey, Macchia warns, the figure is always high, and the conclusion is inescapable.

“Many advisors in the male-dominated wealth management industry are failing to connect with the needs and aspirations of their female clients, especially in the context of serving retired married couples and their families,” Macchia warns. “The wealth management industry must make some big changes to avoid a potential disaster.”

Macchia spoke recently with ThinkAdvisor about the work his company is doing to address this issue and others related to retirement income planning, and he also offered a frank and somewhat pessimistic assessment of the current level of retirement planning being delivered to clients of all stripes.

Ultimately, Macchia argues a “constellation of factors” are creating the conditions for assets to move quickly and away from registered investment advisors who do not evolve with the moment. These include the trillions of dollars transitioning to the control of women; age-related financial needs and preferences; unmanaged threats to retirement security at the national level; increasing economic uncertainty; and a “dangerous,” suboptimal planning process rife with entrenched biases.

“This is not to say that growth is impossible,” Macchia adds. “It will require more advisors to adopt an open mindedness about how to embrace the incredible business opportunity that is retirement income distribution planning.”

Why Widows Fire Their Advisors

Macchia points to data from McKinsey & Co. showing that, by 2030, American women are expected to control a significant majority of the $30 trillion in financial assets that baby boomers will possess. This is in the ballpark of the annual GDP of the United States, he points out.

Much of that money will be held by people who want support from financial advisors, Macchia says. The question is, will the right types of advice and planning support be made available? And if so, by whom? Advisors or artificial intelligence?

According to Macchia, the reasons widows fire advisors are not hard to understand. In survey after survey, widowed women report that their financial advisor treated their deceased male spouse as the “real” client, making little effort to bring either the spouse or adult children into crucial goal-setting discussions and make-or-break planning decisions.

Another big problem that does not just apply for women is the advisory industry’s traditional focus on portfolio building and the promotion of risk-taking as a central means of achieving financial goals. Simply put, Macchia says, there are many investors out there who are  conservative and would prefer to put the focus on wealth protection and risk mitigation rather than wealth maximization.

“It’s too much risk and too much focus on the technical market stuff,” Macchia says. “We also have to be honest that it’s not just in what male advisors are serving up. It’s also about how we are prone to making false assumptions and how we let our biases influence how we interact with client couples.”