Don Froude has no illusions about retirement. Client brochures tend to be filled with photos of people on golf courses, watching picturesque sunsets and sipping umbrella drinks, says Froude, president of Ameriprise's Personal Advisors Group. But when he visits his retired father, it's in an assisted-care facility.
Residential care costs more in one month than any single vacation his father, now in his 80s, ever took, Froude says. If his father's advisor had focused earlier on a holistic financial plan, including long-term care provisions, his father's money could have wound up helping his family or going to charity.
"Where was the advocate for my family when we needed him?" Froude asks during an exclusive interview. "He was too busy managing the money."
As baby boomers approach retirement, Froude says, advisors' focus should shift away from returns and yields and toward determining clients' goals for retirement and personal legacy. "I've built my career on baby boomers, and most of it was in the accumulation phase," says Froude, who has worked in the industry for more three decades. "And now, with 10,000 people retiring every single day, I would submit to you that more than 95% of those people don't have an earthly clue how they're going to get through tomorrow."
Froude says his father's case is not atypical: While the advisor offered steady 8% returns, he failed to ensure that his client had a long-term geriatric care planmissing out on an opportunity to help preserve his father's wealth. "They left him in the 18th hole while they never walked him into the clubhouse," he says.
"In the top 10 things that are important to a client, performance isn't even in the top 10. It is 11 or 12." Froude adds. "What is always No. 1, and has been No. 1 for several years, is: Does my advisor understand my situation?"
He often stresses this message to his advisors, and encourages them to have tough conversations with their clients about retirement goals and legacy. Froude calls it the "last day of life" conversation, in which he asks clients to envision all they want to have accomplished by that day with their money as well as with their time. That exchange helps to build the relationship and ensure that the money is going to the right place, Froude says.
"Five years ago, the conversation would have been, 'Help me make sure I have enough of a pile to retire,' " Froude says. "Once you get to that day where you say, 'This is it; this is what I have,' [then] you protect the pile. Everything switches around and you get fixated on the things in your life that are really important."
Spending more time in those conversations may help advisors compete as the industry moves toward a fee-based model, he says. In the long run, he suggests, new compensation models will eventually allow advisors to charge fees commensurate with their experience, the way lawyers and accountants do.
And focusing on those personal conversations with clients will allow Ameriprise to capture the momentum as the model begins to swing more toward financial planning from portfolio strategy, he predicts. "That's the one thing I'm really proud of about Ameriprise," he says. "When you're trying to tell me why this money manager is better and the beta is low and the delta is over here ... I feel like I'm at a fraternity party, versus [hearing about] what is really important."
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