Thomas Bottone Jr. is a financial adviser at Oceanstate Financial Services in East Providence. He’s seen a lot of changes in recent years with the financial-market turmoil and economic downturn. Many people have seen their nest eggs crushed. Bottone answered five questions about those changes and what has happened since.
PBN: How has the way your clients view the financial markets changed in the last few years? Do people have short memories or has the market declines of 2008 and early 2009 been burned into their minds?
BOTTONE: Almost all of my clients have come to realize that the portion of their assets invested in the stock market, while very necessary for their long-term security, will involve some level of volatility from time to time. They do not have short memories. Most clients still remember clearly the significant market decline from 2000 thru 2002. As soon as their investment accounts recovered from the early 2000s, and the market reached its peak in October 2007, one of the most severe global recessions in history caused another significant drop in values. Although we have lost a number of years recovering from the market downturn, we are now seeing the values exceed what was reached in October 2007.
PBN: How has it changed your views of the markets?
BOTTONE: I have been in practice 25 years and have been through a number of significant market declines and subsequent recoveries. My views on the market’s volatility haven’t changed all that much over the years. If my clients need the return potential that the stock market offers, they need to understand that from time to time the market will go down. What I have come to realize is that I need to clearly understand the risk tolerance of my clients and position them accordingly.
PBN: How has what’s going on Washington, D.C., particularly the debt-ceiling discussion, impacted the financial services and advisory sector?
BOTTONE: The level of debt this country has accumulated is a very real problem. It appears that it will be for years to come. The ongoing, and very public, inability of those in Washington to come to some compromise on this issue has caused a higher-than-normal anxiety level towards the stock market. I believe it was avoidable and completely unnecessary. Advisers have to work harder to keep clients on course.
PBN: I know people are always concerned about having enough money in retirement — I assume that’s the No. 1 concern of your clients. How do you address that worry?
BOTTONE: You are correct. Running out of money is the No. 1 fear in retirement. Part of the overall planning process is getting to the point where we have determined how much income is needed from the client’s investable assets. We then can assess whether there are enough assets to sustain the withdrawals necessary to meet the client’s need. Lifestyle adjustments may be necessary when it appears that there aren’t enough assets to cover income needs over the long-term. The planning process is important for clients. They have been accumulating towards retirement for decades and now they need to start withdrawing from those savings. It is a very big change and I have to make the transition from accumulation to distribution more comfortable.
PBN: How has retirement planning for the industry in general changed in recent years? Everybody’s nest egg took a big hit.
BOTTONE: Yes, most everyone was affected by the market decline in the last decade. A smaller nest egg will yield a smaller income stream. Planning for longer life expectancies is also a major planning issue. The longer we live, the longer our assets need to provide for us. More financial products are available these days to help in the planning process. For instance, immediate annuities and variable annuities, with income guarantees, can be used effectively to provide a secure lifetime income stream and reduce the impact of a market decline. These types of vehicles are used as part of an overall strategy and are very effective in the appropriate situation.
