Ashlee Patten, owner and CEO of The Patten Group
Q. How is the baby boomer retirement wave affecting the financial planning industry?
The financial advisor population is skewed anyway, and the pandemic hasn't helped that. We are experiencing a shortage of advisors. For folks looking for advice from a human, that may be harder to find. Baby boomers were a big part of the financial services industry.
I also think we are experiencing a genuine pivot from what the world looked like to what the world is going to look like. Financial planners haven't had to think about inflation for a long time, which could be a stress point that's under appreciated.
The genie's not going back in the bottle because we have multi-source, structural inflation. To improve the inflation issue we've got to invest our way out of it. The FED continues to raise interest rates, which makes it more expensive to invest your way out. This makes it more expensive to solve the inflation we already have.
Q. Is competition heating up for 401(k) rollovers as baby boomers continue to leave the workforce?
Generally, there are two places where competition is heating up. The first is how to help baby boomers prepare and manage the cash flow for retirement. The other is the huge generational wealth transfer from the baby boomers to their children. That's pretty fiercely competitive.
With the 401(k), there's a new Department of Labor Rollover rule "Improving Investment Advice for Workers & Retirees" which is designed to protect the baby boomers from financial advisors taking advantage of them via rollover strategies. The rule is new and bit cumbersome in practice, but achieving the level of transparency will likely be helpful for those considering shifting around retirement assets.
Part of the issue is that, in the past, people have taken their money out of their 401k and moved it into financial products that are more expensive, or have less ability to get to their money (liquidity), or penalties. This new rule is trying to prevent gimmicks, standardize information comparisons across products, and beef up disclosures, especially expenses. That's the major regulatory change in trying to protect boomers. The fraud impacting boomers is huge. Then the cost of bad advice or landing in the wrong investment can be a problem.
Q. Is now a good or bad time to retire?
It's probably easier to retire into a higher interest rate environment because, theoretically, the safer assets (cash and bonds) are paying higher rates which equates to higher incomes. And that hasn't been the case. We've had virtually zero interest rates since 2009.
The "Catch 22" right now is that we also have inflation, which is running at or around what interest rates are running. So if you're making 5% on a CD, it feels better; but inflation is running at about 6%, so there's a drag.
I think it's fair to say, it should be a little easier to retire now as compared to five or six years ago. That's assuming you have enough to retire.
That's a huge portion of what we do -- help our clients build wealth and figure out if they have large enough asset base to retire and configure the cash flow streams needed to fund. It's one thing to have a big pool of investments, but it's another to have the investments configured for diversified income.
Q. Who are your "bread and butter" clients?
My youngest client was born three weeks ago, and my oldest just turned 101 years old. The majority of my "bread and butter" clients are families and professionals.
We also tend to get people when they have an "aha moment," going through a major life transition like a job change, or birth of a child or death of a family member. Financial advisors help distill and explain complexity.
Most folks are willing to save and manage money to a certain point, but then it scares them. Some are fine while they're earning, then freak out. Typically there is something that spurs people to seek financial advice, like losing money in some way and wanting to know how to prevent that from happening again.
Contributed photography / Garry Thurman, owner and CEO of Guardian Investment Advisors
Garry Thurman, owner and CEO of Guardian Investment Advisors
Q. How is the baby boomer retirement wave affecting the financial planning industry?
A. It impacts us every single day. We have over 10,000 people per day turning 65 years old through 2030. One thing we look at as financial planners is longevity risk. People are living longer. (Can planners determine if have enough. -- absolutely we can.) The No. 1 fear in America is running out of money. The second fear is health care and/or getting sick. So for a baby boomer to have a written income plan is essential, very important.
Guardian Investments is booked four or five weeks out right now. We do TV, radio, podcasts -- our business is crazy great right now because of all the boomers. If we're really focused on Chattanooga, you've got to look at all the people moving here, retiring here. The financial industry service is doing great here.
Q. Does a person need a certain minimum level of investible assets to hire a financial planner?
Yes and no. There are firms in town that, if you don't have 500,000, they're not going to work with you at all. We're a little different in that we want to help everybody. That's one of my goals. It's important that even the small guy needs help, so we don't have a minimum.
I think a lot of people are intimidated to work with financial planners because they think they don't have enough money -- but, in fact, they do. We have folks start at around $20,000. But we do have people who come in with less than that. We do what we can to help everybody.
Q. Are there actions you would recommend in addition to 401(k) accounts to prepare for retirement?
A. Opening a traditional IRA or Roth IRA. But one of the biggest things to keep in mind, based on a person's age, is how much he or she can place into those programs. If you're under 50, your max contribution to either is $6,500 per year in 2023. For those who are over 50, there is a catch-up provision, which allows for an additional $1,000 per year. The more money we put back, the better.
A Roth IRA is a good way to prepare for tax-free income when you retire. For high income earners, though, if you make too much money, you can't do a Roth. High earners may want to consider cash value life insurance plans, which can have tax-free benefits, as well.
Chattanooga's Top Financial Advisor Firms
1. Patton, Albertson & Miller Group, LLC
Assets managed: $1,184,309,204
2. HHM Wealth Advisors, LLC
Assets managed: $864,982,195
3. The Patten Group, Inc.
Assets managed: $511,583,841
4. Acumen Wealth Advisors, LLC
Assets managed: $354,125,304
5. Guardian Wealth Management, Inc.
Assets managed: $344,109,696
6. Evergreen Advisors, LLC
Assets managed: $368,469,659
7. Wealth Preservation Advisors, LLC
Assets managed: $399,434,733
8. Capital Square, LLC
Assets managed: $305,314,646
9. Barnett & Co., Inc.
Assets managed: $157,224,136
10. Apex Strategic Wealth, LLC
Assets managed: $173,126,830
Source: smartasset.com (Rankings accurate as of April 2022.)
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