There are countless sayings about the effects of time on life – timing is everything, time heals all wounds, time is a tyrant, time is of the essence.
While timing is obviously a key component to investing, time is a significant factor in the life of an investor, and advisors need to pay attention to how time is affecting his or her clients.
An investor at age 30 is not the same person living the same life as an investor at 40. Marriage and kids change investment habits, as does (hopefully) increased salary, wages and other forms of income.
At the age of 50, many investors are putting their children through college, and there is no absence of stories written about the cost of college. How those financial decisions are made can clearly affect an investor’s lifestyle.
Obviously, at age 60 investors are thinking about retirement. At 70, many investors are headlong into retirement and thinking about estate matters and the financial prospects of their grandchildren.
When Spectrem researches investors, we segment them by age so advisors understand how the 30-year-old investor is different from the 60-year-old investor. This information is vital to how an advisor approaches an investor in areas such as risk, investment preferences and investment purpose.
When advisors first meet investors, they spend a great deal of time getting to know that person in terms of family commitments, past financial history, career and retirement goals and security demands. The advisor then acts accordingly.
Good advisors often pay attention to an investor’s key birthdays and anniversaries, noting them with a card, phone call or email. But a wise advisor will inquire on a regular basis whether time has changed an investor’s plans and attitudes towards investing.
Two of our more recent studies demonstrates the need to keep up-to-date on the changing pressures in an investor’s life. Family Affairs: How Children Change Financial Decision-Making exhibits how investors with young children approach investing so much differently than investors with children out of the house or no longer dependent upon their parents. But that is a snapshot of investors today; the family dynamic for investors change from time to time and advisors need to update their files on each investor to make certain their investment choices reflect the change in their lives.
Similarly, our quantitative and qualitative report on retirement, Financial Wellness in Retirement, indicates that investors in the beginning of retirement are so much different than those who have been in retirement for one or two decades. Advisors really need to know that an investor’s investment decisions can change over time even when they are in the retirement stage of their lives.
The fact is that life changing events often do not happen on schedule. A sudden expense or a sudden windfall can alter an investor’s investment strategies. Advisors obviously cannot know those events happen without being told, but they can make sure to keep apprised of changes in an investor’s life that might require a reconfiguring of investment priorities.
It’s not being nosy to inquire about an investor’s life when investments play such a big role in an investor’s life.