What do Wall Street financial advisers tell their clients about Social Security? That they shouldn’t count on it. In fact, ex it out of your planning altogether. But behind the scenes, brokers and advisers eagerly use Social Security as a marketing opportunity – even bringing in experts from the Social Security Administration itself to educate them on the ins and outs of the program.
On Wall Street is an online magazine for Wall Street brokers and financial advisors. A feature in the January issue offers a fascinating look at the Street’s convoluted but always opportunistic thinking about Social Security. Author Matthew Leung notes,
While the branch managers we interviewed believe that there is still a strong need for education on the topic of Social Security, many noted that today’s message is different. Top branch managers indicated that their financial advisors are significantly downplaying the role of Social Security in an effort to manage their clients’ expectations and present alternative income solutions.
“In our retirement planning analysis, we run projected cash flows and income needs with and without Social Security, due to the uncertainty of exactly how it’s going to get paid, when it’s going to get paid, or if it’s going to get paid at all,” one branch manager says. Another branch manager concurred, stating: “In all of our retirement projections, we discount the value of the client’s projected social security income and encourage clients to assume that Social Security will not provide much, if any, income throughout their lifetime.”
In other words, the people who many Americans – at least those with some assets to manage – rely on to plan their retirement savings strategy have internalized the message that Social Security benefits will have to be slashed. So much so that there’s little point in even considering them a factor. Indeed, investment firms have built models that discount all or most of the benefit that makes up the majority of income for two out of three retirees. . . . Read the rest of this entry →