'One and done' a flawed approach to retirement planning

How navigating client outcomes rather than defining life by numbers steers sailboat-loving CEO's approach

'One and done' a flawed approach to retirement planning

The value of receiving planning is finally starting to get the recognition it deserves, and if you ask Doug Dahmer, CEO and founder of Retirement Navigator, it’s been a long time coming.

“The inside joke has always been that less than 20% of planners actually do planning and they only do it with the top 5 or 10% of their clients, which meant while they called themselves planners less than 1 or 2% of the population was actually getting the benefit of it,” Dahmer says. “One of the most common themes I hear from clients is how many more once-in-a-lifetime events do I have to live through for my retirement? That’s where the flaw in the industry is.”

Historically, and to a large extent still, planning is viewed as something that’s far off into the future and done as a long-term trajectory, ignoring the fact we live in a world of constant change. The shift Dahmer is noticing is that, slowly but surely, planning as a projection process is giving way to planning as a navigation process: the idea of “one and done” in financial planning is rapidly losing its relevance.

Dahmer’s background in sailing provides the perfect analogy for his approach to his clients’ retirements. He sails up in Georgian Bay and while it’s known as the 30,000 Islands, there are actually 60,000 islands but half are a foot-and-a-half under water. As a result, he’s familiar with navigation: he knows where he wants to get to, but there’s no such thing as a straight line to that ultimate destination. So he takes short trajectories, recognizes there’s a need for course correction, and heads on another trajectory, always aware of where he’d like to end up but understanding he must adapt as he goes.

Though Dahmer has noticed more and more top management at various large companies make a bid to create relevance for their advisors by tying compensation to whether or not the clients have a financial plan, the vast majority are simply going through the process of filling in the fields of a planning program and creating that out-of-touch long-term projection. Compounding the problem, retirement is defined in terms of a number: an average income stream someone needs for the rest of their life. But it’s really about two fundamental questions: am I going to be OK and how do I fund that OK?

“Neither can be confidently or accurately answered without first defining what that OK looks like, which is really identifying what the client wants to do, when, and how big,” Dahmer says, adding that he works with a lot of white-collar executives and within a couple hours of having the client declare what they want and when, he’s able to create a recipe for how they should fund their retirement that typically translates into between $300,000 and $500,000 in tax savings.

“Depending on whether that’s front-end loaded or back-end loaded has vey different implications in terms of how you fund it and how much money you need to do it. Stop defining life as a number and start to define it in terms of outcomes people want to accomplish.”

Dahmer acknowledges it’s a huge mind shift that’s difficult to accomplish in a financial world where the sale of products is still the predominant goal, but the brass tacks of the situation is if you’re defining your business on the basis of picking and choosing investments, you’re not going to be successful long term. While the industry is “using a sledgehammer to drag people into planning” by saying if you want to achieve your full earnings, demonstrate to us your clients have plans in place, it’s often more of a check mark than a valuable document.

Technology will make the new world of planning possible, from the endless new ways to virtually connect much more frequently and easily with clients to be informed of life changes to evolving planning software where the consumer has some real-world interaction with the process. Humans are hardwired to seek certainty and the planning process historically tried to sell that by getting as much precise information as possible to feed into the long-term projection. But the illusion was that that level of precision projects into the future, and the first time they hit a detour in the road people got frustrated over the wasted energy and didn’t go back to adjust it.

With this in mind, Retirement Navigator built its own planning platform called Retirement Designer. Preferring that term to planner, designers are constantly improving a product by making it more functional, cheaper, stronger — and their job is never done. They’re not afraid of making mistakes, look at far more options, engage other people to get more creative perspectives, and rely on a modelling system as the centre of communication. If it’s a good one, the modelling system will also show people the outcome of their choices before they make them and “that’s the core of what’s allowed us to get where the industry will ultimately end up: helping people identify when course corrections are needed and, based upon the information available, what are the choices as to the best new trajectory to head on.” 

Ultimately, retirement has changed so much it’s only logical that planning for it must follow suit, and enabled by ever-evolving technology, the process of planning is going to become much more engaging than what it’s been in the past.

“Planning is finally starting to get recognition, but it needs to go through a significant evolution and momentum has been much slower than I expected considering consumers are saying they want something different,” Dahmer says. “But the first step is to embrace planning as something that will have significantly more value as it has in the past.”