Retirement Planning & Seasonal Financial Disorder

Here we are closing February in Canada, the end of “RRSP season”, in the crunch as if it was the only season to be retirement planning, almost suffering from seasonal financial disorder. We could call it the silly season: motivated sellers of RRSP-eligible investments pursue possible sales “prospects”, many of whom are as confused about what they are doing, as deer caught in headlights on a country road.

The theory of RRSPs is that they will help those working people with no workplace pension plans who are motivated to save for their retirement. These workers will put aside funds in a tax-advantaged plan from which they will access an income in retirement. There are a few problems with this theory. The first is that not everyone needs an RRSP – some people have other assets or plans, which they’ll use to fund their future retirement.

RRSP’s & the acronym alphabet of disorder

0202gail.jpg.size.xxlarge.promoThe second problem is that not everyone wants to put money into an RRSP if it means that their other living expenses are curtailed because they do not have the cash flow to make regular (or irregular) RRSP contributions at a particular point in time. A third difficulty is that for some people, especially on low-income, an RRSP makes no sense. They have no tax liability; they live a simple existence and do not expect to need more in the future. In other words, the minimum payouts from CPP and OAS, plus the Guaranteed Income Supplement (GIS), will be sufficient in their retirement. However, they could augment their retirement income through the Tax Free Savings Account (TFSA) plan.

In what seems to be a new era for Nanny State programs, some governments, notably Ontario, feel that everyone must have a retirement savings plan. Despite the opinions of pension and economic experts – that government-mandated plans actually decrease individual saving for retirement and put a damper on small businesses, which would otherwise increase the number of employees – governments want to forge ahead with these feel-good policies.

For many Canadians, their best choice of financial acronyms may be the TFSA, which has the advantage of being a more flexible savings option. Financial security is the goal of good financial planning. The RRSP program may, or may not constitute good financial planning for some people. This brings us to the whole topic of financial literacy.

Advocating a financial literate consumer

The concept of financial literacy is that an individual consumer is able to rationally evaluate and make informed decisions about personal finances, including the purchase of financial products. Financially literate people can separate the sales “fluff” from hard facts. The key question is “Who benefits?” Is it the client or the advisor? Or is it a win-win?

The world of personal finance includes the sale (and the purchase by the consumer) of financial products, whether those products are mutual funds, savings vehicles, stocks or bonds, real estate or commodities, or various types of insurance. The risk to consumers at any age is that they can be sold inappropriate financial products – often at unreasonable cost.

As yet, a fiduciary standard has not been set for all Canadian personal financial planners, and this proposed consumer protection-oriented standard is being fought by the various industry groups concerned about a reduction in income for advisors and in the number of advisors. Financial services, such as financial products, should offer solutions to the needs of consumers.

Often, solutions offered by advisors are geared to how much money the advisor will make on any given transaction. The financial service companies, which develop financial products, devise marketing programs for these products or services. Sometimes, the advisors oversell particular products, to the detriment of the consumer.

Achieving a balance between making financial products or services available to the consumer and yet providing a fair return to advisors is still a problem in Canada. Other jurisdictions have eliminated commissions on financial products because of potential conflicts of interest between the advisor’s advice and the real needs of the consumer. It looks like such a standard is a long way off in this country, given that our closest neighbour, the U.S.A., is not contemplating such a policy change.

The old adage, “If something sounds too good to be true, it probably is” (that is, the something is not true!), is a good motto for careful consumers.

Marie Howes, PRP

Financial Gerontology: Fusion and Confusion of Terminology – Part 2

fusionIn part one of Fusion and Confusion of terminology, we presented a basic introduction of our individual professional backgrounds, Marie in the financial planning field and Suzanne in the field of gerontology. One thing in common that we both can say about each of these fields is that while practitioners do work on the front line with individual clients, there are also areas where professional services operate at a macro level. Almost like trying to explain – what is engineering? Likely several ways to drill that down (so to speak).

When it comes to our modern day discussion on aging, longevity, retirement, elder care and so on, there are many intersections where concerns such as health, mobility and financial security can, almost in equal measure, be found mentioned in the same sentence. We left you in our last post, pondering on the equation Financial + Gerontology=? So what do we get?

Financial Gerontology

A little history. According to the American Institute for Financial Gerontology, the term was first established as a discipline in 1988. The AIFG registered program is promoted to give a competitive advantage in the market to professionals that include accountants, lawyers, reverse mortgage lenders and of course financial planners. As one of its three value statements declares, it will help a Registered Financial Gerontologist (RFG) “deliver financial solutions in a comprehensive manner with increased knowledge of the older client’s broad based needs.”

It is from this point that broad terminology can really take the consumer on a ride, and to a certain extent beyond a fusion of jargon, it can lead to consumer confusion. Read a little more widely these days and you will hear newer phrases such as “wealth span planning”. Over the years as Marie observes, in Canada we’ve stuck to clumsy but realistic descriptors like “holistic retirement planning” or “financial and lifestyle retirement planning”.

For another turn of a term you can read on the Simon Fraser University Gerontology MA Careers page, how they describe that the “population bulge will have a big impact on the health care sector and a variety of companies and services as they begin to ‘gerontologize’ products and services.” Isn’t that exactly what is happening here with financial planning services?

Beyond legitimacy for marketers

As a researcher and social gerontologist, Suzanne sees this relatively new field of Financial Gerontology facing some challenges that include improving public awareness and financial education, as well as having those with this designation adhere to a professional code of conduct that puts client interests first as they develop innovative ways to better serve unique needs.

Yet, how more well-informed have consumers of financial planning services become over the last thirty years? From Marie’s point of view, perhaps not much, if at all. And for that matter how well understood is the field of gerontology, not to be confused with geriatrics? It would appear there is still a wide gap in understanding in each respective field, without even trying to couple the two.

As a financial planning consultant, Marie sees that as it stands the use of the term Financial Gerontology, especially in the U.S., is simply another technique for gaining legitimacy for the marketers of financial products – whether those products be insurance or investments.

While it may appear that it combines personal financial planning with gerontological data which is applicable to individuals; ideally and realistically, it is the application of corporate and government financial modelling from the data obtained through the study of gerontology. Its end purpose is to produce useful public policy for the benefit of citizens as they age.

Financial gerontology, if it is to be a useful concept, is the combination of financial considerations at the government level, with data obtained through statistically objective research methods employed by qualified gerontologists and demographers.

Big business of aging

Following on that as Suzanne points to here, during the last decade, issues at the intersection of gerontology and finance have come more into the mainstream since some large financial institutions have hired gerontology experts to better develop tools and resources and hone branding for their aging clientele. More recently, Financial Gerontology has been much discussed following the White House 2015 Conference on Aging in the United States, where policy on financial issues was addressed.

One of the best corporate examples of this fusion, Financial + Gerontology, is Bank of America Merrill Lynch. Cyndi Hutchins, is their director of Financial Gerontology who also created their internal Merrill Lynch Longevity Training Program, developed in partnership with the USC Leonard Davis School of Gerontology.

Yes. This kind of thing is now part of this “gerontologized” era, in the big business of aging. In part three of our series Fusion and Confusion, we will look at some of the gaps in understanding that still exist, some macro and micro aspects, and discuss the potential of realistic collaborations between these two professional areas.


Marie Howes & Suzanne Cook

Marketing to the 50-plus: A Disrupted Model

We’re in the midst of a longevity revolution and with any societal change it takes awhile for our institutions to catch up. So too with our efforts to market and advertise to an aging cohort. Not long ago, people over a certain age ceased to exist in the eyes of advertisers. In my agency days, many myopic media plans were written with 18 to 49 year old homemakers in mind. Slowly we started to notice that there was indeed life after 50.

When advertisers finally woke up to the opportunities that existed amongst aging Boomers, they reached into their toolkit of trusty stereotypes and well-worn clichés. Who can forget the silver haired couple walking on a beach, signaling the benefits of retirement planning? It’s as though marketers forgot early lessons in Marketing 101. Let me remind them of a few facts. 

We have no blueprint for today’s 50-plus consumer. For the most part, we’re living longer, healthier lives than previous generations. But we’re also living cyclical, rather than linear lives. Previous generations typically moved through life in one direction: education, work, raising a family and then retirement. This model is now disrupted. Rather than taking a linear path through life, we see plenty examples of people who are blending education, work, a new family and part-time retirement.

Examples abound of people who are exactly the same age but at completely different stages in their life experiences. Here’s an example from my own life.  I had a business meeting recently with someone of similar age, whom I’ve known for many years. Not seeing each other in awhile; he was very proud to show me pictures of his baby daughter now six months old. I have a thirty-year old son who is starting a new family. I suspect that introduces some fairly substantial differences in the way we view the world and in the products and services we buy.  In the old, unenlightened marketing paradigm, we would have been thrown together into the same bucket because we’re in the same age group.

The key lesson for marketers: focus on life stage not age. We can both be 60. but I may be starting a new family and contemplating a new career. You, on the other hand, could be retired and shopping around for a walk-in bathtub.  A world of difference and as a marketer you better be sensitive to these differences.

Gerald Bramm