Which Financial Advisers Really Know How to Prepare Nervous Members?

"What's that old saying 'don't put all your eggs in one basket,'" said Sova, vice president and senior financial consultant at the $1.9 billion DFCU Financial.

Most of Sova's member-clients are retired Ford engineers and white-collar workers. The CUSO Financial Services-licensed adviser said the going has been more than tough for some of them.

"The biggest mistake they made was putting too much in company stock," Sova said.

Across the country, financial advisers are being put to the test as some members put off retirement, express their concerns on whether they've saved enough to retire and generally, wonder when the markets will recover. Still, according to a Curian Capital LLC August survey of 1,305 independent financial advisers, 69% of them said they have not changed their clients' portfolios given recent market volatility. However, 90% are dismayed that more than 80% of their clients do not have enough to live on when they retire.

At DFCU Financial, the majority of Sova's clients are concentrated in the 50- to 60-year-old age range. The credit union has $200 million in assets under management and 2,000 investment service clients. Sova, who has been at DFCU Financial for seven years, said he started preparing his clients about a year and a half ago, when early signs of real estate and stock markets corrections began. He increased bond exposures and cash for retirees, while younger workers were advised to stick with stocks for the long term.

"Over the past 25 years, there were patterns of real estate going through a correction and then 12 months later the same happened in the stock market. This [pattern] has occurred five or six times," Sova said, adding, he made copies of a Wall Street Journal article on the trend and gave them to his clients.

To calm client fears even more, Sova used retirement planning software that calculated savings, factored in Social Security benefits and accounted for inflation to see if it would be enough to live off of during retirement. The visual helped members to see the potential returns, he said.

"The biggest issue right now, and it happened in 2001 and 2002, is when the market gets like this, a lot of people think it's not going to turn around. You have to tell them the economy goes in cycles and eventually, things will get better."

Judy Evers, senior investment adviser representative and trust liaison officer at the $1.3 billion Baxter CU, said lately many of the concerns she hears are from clients in their 50s to 60s who are facing forced or voluntary retirement. Some are worried they do not have enough to sustain them. The parents of these baby boomers are also living well into their 70s and 80s. Combine all of these factors with the market shakeups and everyone is uneasy.

"They're not sure how much more of the volatility they can take and it makes them nervous," Evers said, who serves through CUNA Brokerage Services. "They're really looking for someone to help them get their arms around their retirement situation."

Evers sees roughly 200 high net worth members with accounts ranging from $2.5 million to $3 million. The average account is about $500,000. Many accumulated their retirement income through stock options, bonuses and diversified compensation opportunities, and now they're needing comprehensive planning. Depending on the member's age, time may be on their side. Those with 10 to 15 years left to work, are not as skittish about the current market but Evers still preaches asset allocation.

Estate planning dovetails with retirement planning, including ensuring clients have the appropriate powers of attorney. Luckily, she said, most of her clients with elderly parents don't have to factor in long-term care costs since those expenses were planned for years ago.

"It does make [her clients] more conscious of the need to have long-term care," Evers said. "They realize 'I might live as long as Mom and Dad.'"

Other Baxter clients question whether their Social Security benefits will be cut. Evers tells them the good news is Baxter Healthcare Corp., the $4.6 billion pharmaceutical company, still offers a pension, unlike many large companies.

Evers, a former Bank One adviser, said now is a good time for advisers to roll up their sleeves and prove their worth to members desperately looking for answers.

"I think the coming baby boomer retirement phenomenon is challenging for advisers because there is no one -size -fits-all model," she said. "It forces us to be better planners and look at all the options out there. It challenges advisers to stay current and to be able to put together a suite of things that will fit different lifestyles."

The $1 billion Merck Employees FCU also has ties to a billion-dollar pharmaceutical company, Merck & Co. Inc., which has seen some hard times. In May, it announced it would lay off 1,200 employees in an effort to improve operations. As a result, calls are coming in about benefits and pensions, said Nick Choman, vice president, financial adviser through CUNA Brokerage Services, MEMBERS Financial Services.

"Some are feeling a little bit of apprehension about their positions and some of them are being offered [severance] packages," Choman said. "A lot of people walking through my door are facing the prospect of retirement."

On the other end of the spectrum, clients are also in the early stages of planning for college education while others are currently paying for enrolled students. Of the roughly 200 members he sees, Choman said the turbulent economy has led to more requests for help in managing monthly expenses, and while travel plans have been curtailed, a few are still budgeting for that dream vacation.

"Most are concerned with overall portfolio performance," Choman said. "I continue to tell them a very well-diversified portfolio will help you through difficult and challenging times."

That's the mantra for Wayne Richards, a CUSO Financial-licensed financial adviser at the $1.8 billion First Tech CU. Richards takes it several steps further by helping members see what happened during the last three bear markets and several corrections. Members get a history lesson on how bank failures, a currency crisis and exorbitant oil prices can play havoc on the economy--just as it did in the mid-1990s.

"In fairness to our members, they have every right to be concerned," Richards said. "Part of our job is letting them know that what's happening now is nothing new."

Richards said he considers his 300 clients "very bright people." One-fourth of First Tech's members are Intel employees. Total investment assets under management should be over $50 million, but because of the corrections, that figure is now at about $43 million, Richards pointed out. For those who are close to or in retirement, he always advises that income must be able to outperform inflation and to invest systematically. Rising prices on everything from gas to groceries has caused concern on whether their current income can handle the increases, Richards noticed.

"Invest for the long term," Richard advises members. "My father was not expected to live past 62. Now, people are living into their 80s."

Richards, who has been in the investment advisory business for more than 20 years, said members are more attuned to the markets' ebbs and flows.

"Seems like people are wiser this time, more so than I've seen over the past eight or so corrections and bear markets," he said. "Anyone can be a broker during a soaring bull market. Now is the time when you earn the right to be in partnerships with members. It may sound corny, but it's a wonderful feeling to be able to help them out."

--msamaad@cutimes.com