The Prospecting Professor

Independence: Financial and Otherwise

On .this day, April 12, 1776, North Carolina's Provincial Congress authorized its delegates to the Second Continental Congress to vote for independence. This declaration, the "Halifax Resolves" was the first official action by a colony calling for American sovereignty and independence.

The Halifax Resolves were important not only because they were the first official action calling for independence, but also because they were not unilateral recommendations. They were instead recommendations directed to all the colonies and their delegates assembled at the Continental Congress in Philadelphia. Virginia followed with her own recommendations soon after the adoption of the Halifax Resolution, and eventually on July 4, the final draft of the Declaration of Independence was signed.

Last fall, the Lincoln Financial Group released the results from their "Lincoln Long Life Survey," which covers various retirement issues and includes a look at the priorities of successful people in their 60s.

Overwhelmingly, the survey participants indicated that financial independence was of great importance to them.

• 95% ranked being able to maintain financial independence as extremely or very important.
• 94% indicated that living independently was of extreme importance.
• 92% said that having a secure stream of income for the rest of their live was their #1 financial priority.

Sales Idea #268: Resolve to contact your clients today with your own "call to arms"...and lead them towards their own financial independence

The Savings Habit

Whitlowe Green began his teaching career in 1937...where he earned $700 a year. He retired in 1983...at a salary of  $28,000 annually. Whitlowe Green spent most of his career teaching economics to seniors at Yates High School, which is an inner-city school in the Houston school district.

Upon his death in 2002 at the age of 88, Whitlowe Green left more than $2.1 million to his alma mater, Prairie View A&M University...the largest single-donor in the university's history.

Whitlowe Green was born in Bastrop, Texas (outside of Austin) came of age during the Great Depression and virulent racial segregation. He never married, and lived in a modest brick house in northwest Houston.

Mr. Green was notoriously frugal. For years he rode the bus to school. His colleagues were shocked when he finally bought a car. He wore second-hand clothing, purchased out-of-date meats, and shopped at auctions. Once, he stopped speaking to a relative of his for two years...regarding a disagreement over $6.76.

Whitlowe Green was a savvy investor...and used stocks, mutual funds and annuities. During the later years of his life, he spoke to his personal banker 3-4 times weekly. Every conversation revolved around his desire to have his savings go to Prairie A&M. When he was sick with cancer, he often made his personal banker promise that his beloved school would get the money.

University officials hadn't met Green before receiving the gift, nor did they solicit the donation.

Among educators, Whitlowe Green does not appear to be an anomaly. Many teachers, from elementary to university levels, seem to be adept at establishing the savings habit. To bolster this argument, in a recent study by the Employee Benefit Research Institute, it was revealed that college faculty are better prepared for retirement than other working Americans.

95% of higher education faculty have begun to save for retirement, compared to 69% of all working Americans. 66% of higher-education faculty have attempted to determine how much money they will need to live comfortably in retirement, as compared to 42% of working Americans.

As is often true, it is the savings habit, not income levels, that seem to be the ultimate determinant of savings success.

Given Whitlowe Green's aforementioned modest income levels, the miracle of compound interest may also have been a factor in his largesse.

"Time is on my side, yes it is!"

The Rolling Stones began their conquest of America on October 1st of 1964, when they first appeared on the Ed Sullivan Show. One of their stylistic offerings to the American TV audience was "Time is On My Side,"  a cover of an Irma Thomas tune. At the time, Dana Cable Sr. was 38 years old. (Ed Sullivan was shocked by the appearance of Mick Jagger and company...and vowed that they would never be invited back. They were...five more times.)

Today, Dana Cable is 80 years-old, and the president of Milwaukee-based Growing Systems Inc., a manufacturer of specialty equipment for the propagation of young plants. Cable, still works 10 hours daily, works weekends, meets with his customers...and has no intention of retiring. "I know what I want...and it's not going to Florida to retire...It's still too much fun to work."

Cable may be part of a niche trend...the CEO, executive-entrepreneur who can ignore mandatory retirement rules.

This is a sea change from 50 years ago. In the 1950s, about 25% of all corporate executives died in their office. (I don't mean that they actually died in their chair, behind the desk...I mean that they died before they were 65.) It used to be true that, if you wanted a few years of enjoyable retirement, you better get out before the ravages of the businessman's lifestyle caught up with you, i.e. stress, smoking, Martinis, etc. Today, with healthier habits, executives are living longer...and don't have the same compulsion to "get out while the getting's good."

It's not just the executive-types who plan on hanging around. According to the AARP, 68% of workers between the ages of 50 and 70 plan to work during retirement, or forgo retirement altogether. When you couple the aging of the baby boomers with the relatively low birth rate, it adds up to a workforce that will continue to age. Workers 55 or older accounted for 12.9% of the workforce in 2000; by 2015 they will make up about 20%, according to the U.S. Department of Labor.

Dana Cable plans on continuing to work for, at least, another 10 years. "You can bank on it. That's only 90."

In 10 years, Mick Jagger will be 73.

"Time is on my side, yes it is
Time is on my side, yes it is

Now you always say
That you want to be free
But you’ll come running back (said you would baby)
You’ll come running back (I said so many times before)
You’ll come running back to me"

Retirement Planning: Is $200 Million Enough?

Not if you are a spendthrift! This was exactly the case for a high-net-worth individual who had a $200 million net worth, and requested that his financial advisor analyze his situation. The advisor duly reported that Mr Big Bucks would have to restrict his passion for art collecting to an expenditure of $15 million per year or less.

This anecdote is from a fascinating new article, co-authored by the Wharton School and State Street Global Advisors, entitled "High Net Worth/High Net Risk: Balancing the Variables to Meet Retirement Goals" "link to article"

For many of us, it would seem ridiculous to consider that a multi-million dollar net worth would be insufficient for a long-lasting, comfortable retirement. Not so, according to Olivia Mitchell, the director of Wharton's Pension Research Council and the Center for Boettner Center for Pensions and Research. She says, "Retirement-saving shortfalls run up and down the income and wealth scale. In some cases, shortfalls were worst for people with high earnings. Of course, these people are in position to save a lot, but people with high earnings spend a lot. They don't necessarily set money aside."

Sadly, any amount of money can be frittered away in a remarkably short period of time. In this Age of Consumption, one's level of spending often rises to meet income levels...regardless of where these income levels lie.

As I said, this is terrific article. If you are a financial advisor who is marketing to high-net-worth individuals, the report is a must-read.

Finally, Happy Winter Solstice to you! Solstice celebrations go back at least 30,000 years. Ancient peoples believed that, because daylight was on the wane, it might go away forever. To counter this fearful solar trend, they lit huge bonfires to tempt the sun to return. The tradition of decorating houses and Christmas trees is passed down from these ancient bonfires.

In Ancient Rome, the winter solstice was celebrated with the festival of Saturnalia.

During this festival, Romans gave themselves up to wild joy. They feasted, they gave gifts, they decorated their homes with greenery. The usual order of the year was suspended: grudges and quarrels forgotten; wars interrupted or postponed. Businesses, courts, schools closed. Rich and poor were equal, slaves were served by masters, children headed the family. Cross-dressing and masquerades, merriment of all kinds prevailed. A mock king -- the Lord of Misrule -- was crowned. Candles and lamps chased away the spirits of darkness.

Well, as they say...Ciao!

401k Prospecting: A Providers Perspective

Last week I noted that the # of plan providers who are thinking about changing or actively searching for a new plan provider...is at an all-time high.

In a recent report on managing 401k plans, the Institute of Management & Administration highlights "Nine Keys to Selecting a New 401(k) Provider." For financial advisors interested in pursuing the takeover business, this "inside" perspective may be insightful.

1. Prepare for the search before you start drafting an RFP and sending it out. Make sure it is the right timing for your organization.
2. Get control over your plan assets. This is your bargaining power. When you are looking for a new provider, they want to make sure that your plan assets can transfer.
3. Given a written notice to the vendors that might need it: stable value vendors, recordkeepers and trustees.
4. Review the investment policy structure.
5. Assess whether this is a good time to change 401k providers. Is this a priority for your organization.
6. Think about who will be involved in the search.
7. Think about what you want to request in the proposal.
8. Decided if you should hire a search consultant.
9. Assess your internal capabilities.
10. Be realistic about the time you have.
11. If you do hire a search consultant, ascertain that the consultant is not biased, that they are not receiving fees from potential candidates.
12. Don't distribute a large number of  RFPs.
13. When choosing bidders do research. Find out which providers are in the market space that your plan is in.
14. When you issue the RFP, make sure the RFP elicits good quality bids.
15. Make sure your RFP questions all have a purpose.
16. After you send the RFP out, hold a bidders teleconference to answer questions.
17. Once the bids arrive, know how you are going to analyze the proposals, and what kind of scoring method you will use.
18. Choose two to three finalists.
19. Have finalists come to your site and do a presentation, or conduct site visits to their base of operations. The latter is preferable, as it will give you better insight into the provider and its culture fit for your organization.

In the first place, for all you math whizzes out there, you are saying to yourself, 'What's with the title of this report? There are nineteen keys to selecting a 401k provider that are listed here.' Hey...cool it! I didn't make up the title, I'm just reporting on it.

Either way, selecting a new 401k provider is a daunting task...and so is prospecting for  the takeover business. Every little bit helps. Hope this helps you.

Retirement Trends and Thoughts

In today's Horsesmouth, there is a very compelling article entitled "Older Workers: Untapped Assets for Creating Value" This article joggled my thoughts somewhat, and I wanted to share with you some resources that touch upon the very large topic of: Retirement Demographics and the impact upon advisors who focus on investors who are 50+ in age.

Here are two statistics that might grab your attention. The Bureau of Labor Statistics estimates that by 2010, there will be a Job Glut in this country...10 million more jobs than people in the workforce. This will create many more opportunities for the 50+ worker, who in past decades (and today) was/is phased out of the workforce...often involuntarily. This job glut, and the lack of savings foresight, will compel many workers to re-think their retirement scenarios.

In a parallel development, a recent Rand Corp. study shows that a growing share of older workers are starting or buying their own businesses. The study indicates that the % of self-employed business owners who are 50+ in age is now 40.5% of the self-employed population. What is apparently driving this trend is the large number of folks in their 50's who have simply had it with the corporate life...and are now parlaying their savings into their own business enterprise.

How will these trends affect advisors? For example, in the case of corporate employees becoming self-employed business owners, there might be some very interesting opportunities for the advisors who position themselves as a resource to the Budding 50+ Entrepreneurs. The "reward" for the advisor who positions themselves appropriately, would be the opportunity to manage self-directed retirement rollovers.

As I mentioned, this is an immense topic. Let me leave you with a few resources that you can refer to...should you want to research this more. In the first place, Horsesmouth has many good articles on how advisors can tap into these demographic trends. Horsesmouth is a subscription-based service, yet well worth it in my view. Another great resource is Knowledge@Wharton. They have a number of good white papers including, "Redefining Retirement in the 21st Century." Access is free, yet registration is required. Finally, AARP is always helpful. You can go to their website, and browse by main topic area. They always seem to have good articles and studies on the changing face of retirement.

Hope this helps.