What an advisor might or might not tell you

Let's say, hypothetically speaking, that one's advisor is somehow deficient in speaking to "retirement income solutions" -- keeping in mind that the older I get the less outrageous of an assumption this gets -- rather than to the bread and butter of what they really do.  To be overly reductive and a bit unfair let's say what they really do is collect fees and recommend asset allocation frameworks.  If that is what they do, and if they won't broach the topic of fee negotiation -- which they usually don't...but should -- then pretty much the bulk of what you hear about in a conversation will devolve, again reductively and unfairly, to "asset allocation."


All you who have skin in the game should recognize that this is, as I say, deficient...and risky. What the advisors don't own, other than the ability to nudge fees but won't broach, is pretty much everything else other than asset allocation.  I didn't see a ton of this acknowledged in my reading in the lit on retirement over a few years of doing this, with the exception of work in economics and quite advanced practitioners in quant finance.

While asset allocation is obviously important (don't misinterpret me here) it is most important in the extremes. Extreme under-allocation to risk and extreme over-allocation can hurt over a long time frame.  All the other things involved in financially landing softly to earth on the day we pass away have more to say than just a discussion of asset allocation will.  I'm seeing this acknowledged a bit more these days.  Here are some examples of what I'm talking about; not sure if they 100% make my case but I hope you get the point, the same point I've hammered here for at least a couple years:

In general, they find spending rates higher than 5% of initial wealth produce unacceptably high probabilities of ruin. The spending decision dominates the asset allocation decisions at a 5+% rate: “No matter what reasonable portfolio is chosen, asset allocation will not turn a bad situation into a good one” because return and variance move together and any attempt to increase return also increases the failure rate (p. 97). The two most effective levers for controlling retirement success, according to Milevsky and Robinson, are (1) postponement of portfolio distributions to a later age and (2) reductions in consumption targets.  -- Longevity Risk And Retirement Income Planning, Collins, Lam, Stampfli 2015 CFA Institute Research Foundation. [emphasis added]

[note accumulation bias] The evidence discussed, based on long-term data for the U.S. market, suggests that adjusting the periodic contributions was far superior to adjusting the asset allocation. Furthermore, of the feasible adjustments to the contributions discussed (the FBL policies), results showed that the more flexibility an individual was able or willing to accept in the periodic contributions, the larger are the benefits obtained. The benefits obtained from these dynamic policies, relative to a static strategy, were twofold: (1) improved average performance and performance in bad scenarios as measured by their NPV; and (2) larger nest eggs on the retirement date and reduced proportion of shortfalls from the target portfolio chosen. The results discussed here suggest that it is critical for individuals to have a financial plan, to periodically assess whether their plan is on track, and if it is not, to introduce adjustments to the periodic contributions to their retirement portfolios.  -- Managing to Target: Dynamic Adjustments for Accumulation Strategies, Javier Estrada, Ph.D. 2019 [emphasis added]

Our prior research shows that investment success is within the control of long-term investors. Factors within a long-term investor’s control—such as saving more, working longer, spending less, and controlling investment costs—far outweigh the less reliable benefits of ad-hoc return-seeking portfolio tilts, market timing, and forecasting future scenarios. Thus, decisions around saving more, spending less, and controlling costs will be much more important than portfolio tilts. -- Vanguard economic and market outlook for 2020: The new age of uncertainty. Dec 2019 [emphasis added]

h/t D Cantor