PLANADVISER - May/June 2021 - 14
trends
An Age-Old Problem
Advisers often disregard life expectancy when designing financial plans
" WHEN do you expect a given client to die? " asked David
Blanchett, head of retirement research at Morningstar
Investment Management, in a recent Retirement Experts
Network webinar. " I've looked at the data and I can say
confidently that this is one of the most important assumptions
you will factor into any financial plan. " Evidence indicates
that the advisory industry makes these assessments
poorly, he said. " [This] has a direct bearing on the quality of
the financial plans being delivered to clients. "
The concept of life expectancy itself could be better
understood, he observed. " The actual definition of life expectancy
is the average number of years a person can expect to
have left to live, on average, at a specific given age. This is a
nuance that's important for advisers to understand. "
Blanchett cited the example that a newborn baby boy's
life expectancy today, in the U.S., is about 76. However, for
a healthy 65-year-old male, the figure is approximately 83.
" This is a really interesting feature of life expectancy as a
concept, " Blanchett said. " In essence, as people get older
and approach the 'normal' retirement age, their life expectancy
increases. At the same time, life expectancy improvements
have been very steady over the last century, which
has been remarkable. It's projected that, by 2100, a person
could expect to live to twice as long after 65 as they would
have in 1900. "
Therefore, he said, retirement plan advisers and
wealth managers need to understand this dynamic. " As an
adviser, you basically have this effect where the younger
and healthier your clients are on average, the more you can
expect their life expectancy to increase over time and to
be greater than existing retirees, " he said. " We absolutely
must factor such things in to the actual development of
people's financial plans. "
He also stressed doing an honest assessment of a given
client's lifestyle and health while working on the person's
financial plan. Advisers often assume such factors will
only moderately affect the financial plan's success, but the
impact can be huge.
" Consider the effect of a behavior such as smoking, "
Blanchett said. " The data show this is one of the biggest
factors for your clients'
longevity. Also, those with a lot
more assets live a lot longer than those with a lot less. I'm
speaking to advisers here, and I can say pretty confidently
that your clients will very likely be people with more money
14 | planadviser.com May-June 2021 Art by Tilda Rose
http://www.planadviser.com
PLANADVISER - May/June 2021
Table of Contents for the Digital Edition of PLANADVISER - May/June 2021
Publisher’s Note
Compliance News
Data Points
Trends
Eyes On The Investment Menu
2021 PLANADVISER DCIO Survey: The State Of DCIO
The Promise Of Sustainable Investing
Wealth Transfers On The Horizon
Rollovers And Fiduciaries
Caution Needed Regarding Rollovers
Advisers Giving Back
PLANADVISER - May/June 2021 - Cover1
PLANADVISER - May/June 2021 - Cover2
PLANADVISER - May/June 2021 - 1
PLANADVISER - May/June 2021 - Publisher’s Note
PLANADVISER - May/June 2021 - 3
PLANADVISER - May/June 2021 - Compliance News
PLANADVISER - May/June 2021 - 5
PLANADVISER - May/June 2021 - 6
PLANADVISER - May/June 2021 - 7
PLANADVISER - May/June 2021 - Data Points
PLANADVISER - May/June 2021 - 9
PLANADVISER - May/June 2021 - Trends
PLANADVISER - May/June 2021 - 11
PLANADVISER - May/June 2021 - 12
PLANADVISER - May/June 2021 - 13
PLANADVISER - May/June 2021 - 14
PLANADVISER - May/June 2021 - 15
PLANADVISER - May/June 2021 - 16
PLANADVISER - May/June 2021 - 17
PLANADVISER - May/June 2021 - Eyes On The Investment Menu
PLANADVISER - May/June 2021 - 19
PLANADVISER - May/June 2021 - 20
PLANADVISER - May/June 2021 - 21
PLANADVISER - May/June 2021 - 22
PLANADVISER - May/June 2021 - 23
PLANADVISER - May/June 2021 - 24
PLANADVISER - May/June 2021 - 25
PLANADVISER - May/June 2021 - 2021 PLANADVISER DCIO Survey: The State Of DCIO
PLANADVISER - May/June 2021 - 27
PLANADVISER - May/June 2021 - 28
PLANADVISER - May/June 2021 - 29
PLANADVISER - May/June 2021 - 30
PLANADVISER - May/June 2021 - 31
PLANADVISER - May/June 2021 - 32
PLANADVISER - May/June 2021 - 33
PLANADVISER - May/June 2021 - The Promise Of Sustainable Investing
PLANADVISER - May/June 2021 - 35
PLANADVISER - May/June 2021 - Wealth Transfers On The Horizon
PLANADVISER - May/June 2021 - 37
PLANADVISER - May/June 2021 - Rollovers And Fiduciaries
PLANADVISER - May/June 2021 - Caution Needed Regarding Rollovers
PLANADVISER - May/June 2021 - Advisers Giving Back
PLANADVISER - May/June 2021 - Cover3
PLANADVISER - May/June 2021 - Cover4
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