Often many elderly clients have no choice but to draw down
their retirement nest eggs, whether to maintain their standard of living or pay
for costly health-care services. And this fact-of-life for aging clients has
created a dilemma for many financial advisers: Should they drop their elderly
clients if their assets fall below the practice’s account minimums?
It is a tricky question for many advisers with long-time
clients with whom they have built a personal relationship. While downgrading or
even firing a client who ignores advice or drastically overspends can be pretty
straightforward, lowering the level of service or even ending it for older
clients can be difficult.
Indeed, some financial planners argue that keeping a
“smaller” client is just par for the course in the advisory world, a necessary
cost of doing business. Houston-based adviser Scott Bishop says he is currently
helping a client in her mid-80s whose husband has Alzheimer’s to navigate
gaining power of attorney over all of the couple’s assets. He has dropped his
fees for her. He added that he never fires clients--especially aging
clients--because of minimums, choosing instead to make a decision on the front
end whether to take them on as clients and then retaining that responsibility
going forward.
Still, there is a question of fairness that crops up in
these discussions, especially if certain fees or account minimums are waived
for some clients, while other, more wealthy clients are asked to foot the full
bill. Those advisers who feel they have a duty to serve their aging clients
with shrinking assets look to streamlining services or finding other ways to
make their business more efficient. This way, clients still feel like they are
getting the advice and value they want.
Technology is also providing new ways to streamline
business, with so-called robo-adviser software providing more automated
investing platforms. At Mr. Orecchio’s firm, for example, advisers work with
clients to lower fees, primarily by switching to an investment-management
services option with a smaller fee schedule, and then adding planning services
on a one-off basis with an hourly fee.
But the firm has had talks about creating a lighter version
of their wealth-management services which could include things like cutting
down to meeting once a year or removing layers of customization from
portfolios.
Click
here to access the full article on The Wall Street Journal.