Social Security Savvy Still Pays

Amid the recent changes in rules, Social Security expertise can make existing clients happier and more engaged with a firm by providing tangible value.

This Practice Management article is intended for financial advisors only (registered representatives of broker/dealers or associated persons of Registered Investment Advisors).
 

Not so long ago, Terry Prather was advising clients to submit restricted applications for Social Security retirement benefits. Similarly, Timothy Hayes was explaining the file-and-suspend plan to his clients.

However, the federal budget legislation signed into law in November 2015 reined in those two popular tactics.

Is that the end of savvy Social Security options for financial advisors to bring to clients? Apparently not.

“I still think Social Security planning is a viable area for advisors to add value for clients,” says Prather, a wealth planner at Keystone Financial Consulting, a division of Payne Wealth Partners in Evansville, Indiana.

Hayes, president of Landmark Financial Advisory Services in Pittsford, New York, concedes the rules have changed significantly, but he reports that he’s waiting for the developer of a planning application he uses to update Social Security-projection data so he can see whatever “sweet spots” remain.

Spike in Interest
Meanwhile, the underlying premise behind offering sophisticated Social Security strategies remains intact. Millions of baby boomers are approaching retirement, eager to get the best deals from this complex federal program.

“We are much busier now, given the recent changes to Social Security,” says Ash Ahluwalia, president of National Social Security Partners, a planning firm in New Brunswick, New Jersey. “People want to know how they are affected and what they should be doing.”

Ahluwalia describes meeting with a plumber and his wife one day and with a couple worth $80 million the next. “No matter how much people have, they all want to know how to maximize their Social Security benefits,” he says. 

Indeed, some planners are delving deeper into this topic and reporting considerable interest from clients and other professionals. “Specializing in Social Security planning has helped me to differentiate myself from most advisers, who do not have this knowledge,” says Joe Alfonso, founder of Aegis Financial Advisory in Lake Oswego, Oregon.

One approach to using such expertise is to offer stand-alone meetings about Social Security-claiming options, for a fee. Among advisors doing so is Joe Elsasser, managing member of Sequent Planning, a RIA firm in Omaha, Nebraska, who relates that scant attention was paid to Social Security strategies a few years ago. “I learned how little people knew about them, including advisors,” he says. “But the demand was there.”

Elsasser studied the topic, and then ran a seminar in conjunction with the gerontology department at the University of Nebraska at Omaha. “We had more than 180 people who tried to register for 120 seats,” he says.

From that Social Security seminar grew a “retirement transition series,” held in libraries throughout Omaha and a neighboring county, also covering Medicare and long-term care and estate planning.

For those wanting to learn more, Elsasser offers Social Security sessions. “Often,” he says, “those sessions lead to engagements covering the rest of retirement income planning. The focus on Social Security has become the primary way we generate new clients.”

Alfonso, who works mainly with clients who are already retired or are on the verge of doing so, also provides specific Social Security planning, which he promotes on his website. In addition, he says, “I’ve consulted for other planners whose clients need claiming advice.”

Key Component
Other advisors position themselves as being knowledgeable in this area, even though they don’t offer stand-alone engagements. “We do not provide Social Security planning as a separate service, because we need to understand a client’s entire picture to provide the most relevant claiming strategies,” says Prather, the Indiana planner.

As boomers approach the moment to make decisions about Social Security, they are drawn to advisors who show special expertise in the subject.

Jim Blankenship, of Blankenship Financial Planning in New Berlin, Illinois, for example, has written “countless” accounts of the rules and options available. “These days,” he notes, “at least a third of my clients come to me having first read an article or one of my books about Social Security strategies.”

Mike Prendergast, a director at Altfest Personal Wealth Management in New York, reports having “in-depth discussions” about Social Security with clients, potential clients, and even other professionals. “Their clients are asking about Social Security, which is not a core knowledge area for them,” he says.

Although Prendergast does not expect Social Security by itself to be a large revenue source for his firm, his expertise does have other benefits. “It can make our existing client base happier and more engaged with our firm by providing tangible value,” he says.

Enhanced service was also mentioned by Kelly Henning, an advisor at Modera Wealth Management in Westwood, New Jersey. “We’re using updated Social Security Analyzer software,” she says, “to more efficiently analyze maximum claiming strategies for our clients. Social Security and health care, including Medicare, are paramount in our clients’ minds.”

Recently, several of her clients called or e-mailed in reaction to headlines about the changes to claiming strategies.

“We have been actively going into our files in the Social Security Analyzer to review those clients who were advised to consider the file-and-suspend strategy in recent years,” she says. Under this strategy, Spouse  A files for Social Security benefits, Spouse B files for spousal benefits on A’s record, and A suspends benefits in order to receive larger checks in the future.

Dual Deadlines
Seniors who have existing file-and-suspend plans are grandfathered, but for others, the window will close April 30. “For clients who have not started the file-and-suspend strategy and will not do so by April 29, we are reevaluating the best way to maximize their benefits,” Henning says. Clients who will be 66 or older on that date can file and suspend until then.

“There are also many individuals who can still file a restricted application for spousal benefits,” Henning says. Eligible are those who were 62 or older by January 1. With this tactic, an individual claims spousal benefits only, allowing his or her own benefits to keep growing as late as age 70.

“The recent rule changes are phasing in over two different time windows,” Alfonso points out, “and there are still folks who can take advantage of them if they act in time.”

For example, he has a new client who turned 66 in 2015 and has a much younger wife and two minor children. This man did not know about using file-and-suspend to trigger family benefits for his wife and kids, so he would have missed the window. Alfonso says his advice about Social Security will bring about $150,000 in additional income to this family.

Elsasser thinks Social Security remains a valuable specialty. “I believe this is still a viable concentration area for advisors, particularly over the next four years, when confusion among consumers will be high and misinformation will be all over the place.”

—By Donald Jay Korn

Donald Jay Korn is a contributing writer for Financial Planning in New York. He also writes regularly for On Wall Street.