Planning for the New Retirement

A Conversation with Ken Cella of Edward Jones

In this episode of our Wealth Management Leadership podcast series, SIFMA president and CEO Kenneth E. Bentsen, Jr. sits down with Ken Cella, Principal of the Client Strategies Group at Edward Jones for a conversation on how the pandemic has shaped the way advisors and clients approach the “New Retirement.”

We discuss its four pillars of health, family, purpose and finances. We also explore how the pandemic led investors to focus more on life’s priorities, its impact on retirement savings trends, and how it prompted first-time legacy planning conversations for 44.5 million Americans.

About SIFMA’s Wealth Management Leadership Podcast Series

The financial advisor-retail client relationship is critical to helping retail investors accomplish their unique financial goals, including saving for retirement, funding a child’s education, buying a home or creating a legacy.

In this podcast series, SIFMA President & CEO Kenneth E. Bentsen, Jr. speaks with wealth management industry leaders for an insider’s look into the advisor-client relationship. The financial services industry deeply believes we must boost retirement savings, enable Americans to save more, promote financial literacy and support a strong retail investor culture. This exciting new podcast series looks at how SIFMA member firms have enhanced the client experience by exploring innovative approaches to drive client engagement including teaming, exploring demographic trends and the role technology plays in wealth management.

Transcript

Edited for clarity

Ken Bentsen: I’m Ken Bentsen, president and CEO of SIFMA. I want to welcome you to another episode of the SIFMA Wealth Management Leadership Podcast Series, where we speak with industry leaders on different trends and approaches to enhancing the investor/client relationship.

Today, we’re joined by Ken Cella of Edward Jones for a discussion on how to plan for the new retirement, as well as the pandemic’s role in driving first-time legacy planning. Ken leads the Edward Jones Client Strategies Group, which includes advice and guidance, products and marketing. Ken also serves on the Edward Jones Executive Committee, the team responsible for defining the future state for Edward Jones to fulfill its purpose to partner for positive impact to improve the lives of clients and colleagues, and together better communities and society.

He is the senior executive sponsor of Edward Jones’ Hispanic Business Resource Group, and serves on SIFMA’s board of directors, SIFMA’s executive committee, and chairs SIFMA’s board subcommittee on private client and wealth management.

Ken, it’s great to have you here today. You know as well as I do that the financial services industry continues to evolve to better serve our clients’ ever-changing needs. And that was particularly evident during the onset of the pandemic. Edward Jones has done several fascinating studies to look at how the pandemic has reshaped the way investors view retirement, as well as how it’s changed our conversations around planning for the future.

So, maybe before we dive into the pandemic’s impact, why don’t you tell us more about Edward Jones’ holistic look at retirement, and walk us through what you identify as the four pillars of the new retirement?

Ken Cella: You bet, Ken. And I’ll just underscore that word, new retirement, because we really sought this study to understand what our clients thought about retirement, and a new way of thinking. And so the new retirement no longer means the end of work, but really it’s more about having greater freedom to choose whether and how much someone wants to work, and what else they want to do with their time.

So our research, in partnership with Age Wave and the Harris Poll, revealed the four key ingredients for living well in this again underscored, new retirement. And we really discerned that there are four pillars that really matter to people: their health, their family, having a sense of purpose in what they do, and having a financial situation that underscores their ability to do those first three things.

So let me, if I can, let me start with health, Ken. Physical health naturally declines with age. I think we all experience that to some degree. But our research also shows that mental health, psychological and emotionally, actually rises. And so, there’s some level of resilience that we build as individuals.

And overall, our health spans do not match our life spans, with older Americans living an average of 10 years in poor health — an important thing to really get our minds around. And the cognitive or brain health is of supreme importance and worry for retirees, that was very clear in this study.

We know that Alzheimer’s and other forms of dementia are the conditions they fear they most. That came through loud and clear. Right in the middle of the pandemic we asked that question about what they fear the most, and it was Alzheimer’s — more than cancer, heart attack, or even infectious diseases like COVID-19.

So, most retirees really draw their greatest nourishment from family relationships. We talked a little bit about health, but let me switch to family. For most Americans today, family extends beyond blood relatives to include families of infinity. We all have different relationships with different individuals, and for some people those extended family relationships are really a part of that inner circle.

Generational generosity is the rule, with retirees willing to do whatever it takes personally and financially to support family members in need, even when it meant sacrificing their own financial security. This really came to life through this research, which again happened right in the middle of the pandemic when people really needed help.

And we also found out retirees without close connections to family and friends faced greater risk of physical and social isolation, which also became a very real issue in these last several months.

You know, Ken, retirees with a strong sense of purpose are happier, healthier, and live longer. So, now we’re going into the purpose pillar. People report that deriving their strongest sense of purpose from spending time with loved ones was really key.

They also face a new challenge and opportunity in how to use their newfound time affluence. This is something that really came through. When someone enters this new retirement phase, it’s a new chapter. It’s an opportunity to take that time and invest it. This time affluence was a really central theme. They don’t just want to keep busy, they want to spend their time in useful ways and rewarding ways.

And a strike 89 percent of all Americans agree, there should be more ways for retirees to help in their community. So, they’re looking to get involved.

And finally, the fourth pillar, the financial goal of the vast majority of retirees is not to accumulate wealth in and of itself, but to have sufficient resources to provide security and freedom to live this next chapter of their lives the way they want to, focused on the things they care about. Many retirees find that managing money in retirement can be even more challenging than it was to save money for retirement.

Even in today’s volatile markets, retirees’ greatest financial worry is the cost of healthcare and long-term care. That remains the single largest expense for retirees.

The key to financial preparation is looking holistically at how one wants to live in retirement, and not just how much money may be needed. That really came through loud and clear.

Ken, those are the four pillars, and we really found that those four defined for us so much of what people are thinking about in this new version of retirement.

Ken Bentsen: Yeah, that’s really, it’s on the one hand really fascinating, unpacking it that way. And on the other hand, really logical when you think about it. But I don’t think people have really thought about it that way. And really, it does give a whole new look to the whole how you look at retirement, and more so than I think we have, and society has, in the past.

Let me move on to, earlier this year Edward Jones put out an excellent study looking at the pandemic’s impact on the four pillars of new retirement, called “What a Difference a Year Makes.” What are some of the main takeaways from that?

Ken Cella: Yeah, Ken, there were several, but why don’t I do this — let me start with some of the silver linings, if you will, from the pandemic, and there were some. Our research revealed earlier in the year that 76 percent of Americans say they focused on what’s most important in life. So, they really reprioritized their time. The pandemic forced that sense of prioritization to what’s most important.

And then, 70 percent of Americans in the study said that the pandemic caused them to pay more attention to their long-term finances. They really took the time to review it, and to really understand how those financial matters really lined up with what’s most important.

And then, 61 percent of retirees said the pandemic gave them more appreciation for what’s really meaningful in life. So, there were some silver linings, and that was really helpful to see that come through in the study.

Unfortunately, though, the pandemic has drastically altered the course of retirement for many Americans. And oftentimes, this is a different group — 69 million Americans said COVID-19 has altered their retirement timing, and a third of those planning to retire say their retirement has been delayed, and primarily due to financial reasons.

As many as 22 million Americans stopped making monthly retirement plan contributions during the pandemic. And so, this was alarming.

And families have also been impacted. 24 million Americans have provided financial support to adult children due to the pandemic — and this was staggering for us. More than 70 percent of retirees are willing to provide this kind of financial support even if it jeopardized their own financial future.

And so Ken, these were some of the trends that really came through that one wouldn’t necessarily be looking for in the course of providing financial advice and support to our clients, but really revealing.

Ken Bentsen: Yeah, it really underscores the broad impact of the pandemic, and how it has had an impact on virtually everyone across the country. And it’s also particularly interesting, and troubling as you said, with regard to the number of Americans who halted or reduced payments to their retirement savings. But also, a positive in those who are contributing more. And then, the whole question of delaying retirement altogether.

As we look at all of these, the numbers in your study and the results, what does that mean for the role of the financial advisor in how they help their clients weather a storm like something like the COVID pandemic?

Ken Cella: Yeah, you bet. As we continue to weather the impacts of the pandemic, those numbers are continuing to grow. Our most recent data shows that nearly 50 million American adults of all ages who plan to retire, 34 percent completely stopped or reduced their retirement contributions during the pandemic.

Even more alarming is that 38 million American adults of all ages who plan to retire, 27 percent of those say they withdrew money from their retirement savings or their 401(k) plan because of the pandemic. So again, parents with children in the household are even more likely to have done so at 35 percent.

A financial advisor can help navigate the impact of the pandemic and help clients get back on track to set new goals. I think that’s the thing I really want to highlight, Ken — all these things have happened, but a financial advisor can really help. Clients are looking for a financial advisor to be their guide in this way — someone who can understand them, their unique needs, and then help them to achieve their personal financial goals.

Our financial advisors cultivate deep and meaningful relationships. We believe that’s our competitive advantage. And when they do that with their clients through goals-based advice, and provide a solutions-based approach that establishes a framework for long-term success, that helps our clients stay on course even during volatile times, because they can go back to that framework and that plan that their financial advisor helped with as they were guiding them.

A financial advisor can provide holistic guidance ranging from education on personal finance and planning for long-term care expenses to the very tactical decisions, such as when to start social security benefits. That’s what we’re here to do, Ken.

Ken Bentsen: That’s really interesting. Maybe shifting gears a little bit, you also recently released new data on the pandemic’s impact on legacy planning. Can you walk us through what you found?

Ken Cella: Yeah, this was fascinating work. Something we all think about from time to time is our legacy, and according to our latest data in partnership with Age Wave and Harris Poll, a third of US adults report the pandemic triggered conversations with close family members about their end-of-life plans and preferences.

For about 44.5 million Americans, these first-time discussions about topics such as finances, health, and legal plans were really revealing. These conversations come at an opportune time, as 66 percent of Americans also report the pandemic has made them think more about the kind of legacy they want to leave to their families, such as lasting memories from shared experiences, life lessons and values — those are things people really want to pass on. And then of course, an inheritance. Those are really important as well, but these lasting memories and life lessons really preceded the inheritance.

Ken Bentsen: Certainly tough but important conversations to have about end-of-life and legacy plans. With the holidays coming up, families might be spending more time together — hopefully more time this year than last year. Is it the right time to have these conversations, and if not when is the right time?

Ken Cella: Yeah, Ken, this is so important. These conversations are really key, and they can be emotionally charged. Our research found that three in five US adults report there are barriers when it comes to having family discussions about important financial topics. The top three roadblocks include avoiding family conflict, attempting to avoid burdening family members with their finances, and being too uncomfortable to discuss these topics. I don’t know about you, Ken, but those all seem very natural to me.

The holiday table may not be the best place to bring these topics up, if you want everyone to stick around for dessert. Instead, it’s probably helpful to be intentional and set time with family members to have a conversation. And this is back where a financial advisor can be a guide and really help with this.

Giving everyone a little more time to prepare emotionally, and even come to the table with questions, can help set the stage for a calm, productive conversation around legacy planning. And often, facilitating this with a third party, like a financial advisor, can be very productive.

Ken Bentsen: And what advice would you give to folks with retired or aging parents about how to approach these conversations? Again, you mentioned the role of the financial advisor — how do they help as it relates to senior investors, and having these discussions with their families?

Ken Cella: Yeah, such an important question, Ken. A financial advisor can help facilitate conversations and make things a little bit easier for family members by really just getting into the financial concerns and starting to understand that. Also, getting a picture of their intergenerational needs.

And oftentimes, what comes up in these conversations are the end-of-life financial considerations that people have. So, it’s really important.

One encouraging data point that we uncovered was that 22 million Americans began working with a financial advisor for the first time during the pandemic. So, that was really promising.

Ken Bentsen: That’s particularly interesting. So finally, as the way we approach retirement continues to evolve, what do you see on the horizon as we come out of the pandemic, and what do we have to look forward to, and what are some of the challenges ahead?

Ken Cella: That’s a little bit of looking into the future, and I don’t think any of us can predict what the world will look like tomorrow or one year from now. What I can say is that for us at Edward Jones, our human-centered approach will continue to be the hallmark of our business. It has been, and it will continue to be.

And this means understanding and serving clients through deep personal relationships — I mentioned that earlier — meeting their needs across their lives in a way that’s really most important to them. Because every individual, every couple, every family has different and unique needs.

Our clients’ personal well-being and financial wellbeing are equally important. And so, we’re trying to focus on both, Ken, both that personal wellbeing as well as their financial wellbeing. That really came out in these four pillars.

As clients’ and investors’ expectations change, we see technology playing a bigger and more important role, complementing the human-centered advice while making financial advisors more efficient and effective in the way that they support and guide their clients.

And I know we’ll continue to be driven by our purpose, which is to partner for positive impact to improve the lives of our clients and colleagues and together better our communities, and really society as a whole. We believe there is power and purpose in working together to make our world a better place, just as we do together on the SIFMA board, Ken.

We believe in the power of human relationships that are based on serving each other’s needs, and really for the greater good of society.

Ken Bentsen: Ken, thank you so much for talking with me today on these really critical issues. And for more information on the investor/client relationship and the role of the financial advisor, go to www.sifma.org.

And thank you, Ken, again for being with us here today, and thank all of our listeners for listening in.

Ken Cella: Thank you, Ken.

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Ken Cella leads the Edward Jones Client Strategies Group, which includes the firm’s Marketing, Products, Research and Trading, and Solutions areas. He serves on the Edward Jones Executive Committee.

Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. Mr. Bentsen is also the CEO of the Global Financial Markets Association (GFMA), SIFMA’s global affiliate.