It’s Derby time in Kentucky. Here’s what the Greatest Two Minutes in Sports can teach us about financial advising.

On Saturday, two dozen 3-year-old thoroughbreds will trot to the starting gate for the 150th running of the Kentucky Derby. 

Being a native Kentuckian myself, it’s a racing experience I look forward to every year. 

But the Kentucky Derby can also teach us a thing or two about interacting with our clients and helping them make good decisions for retirement. 

Here are my top 3 lessons advisors can learn from the Run for the Roses.

#1 | People bet horses for many different reasons

One year, I had the honor of attending the Kentucky Derby with a friend visiting from Ireland, who loved thoroughbred racing. He had spent weeks studying the entries and choosing each of his bets carefully, based on lineage, build, and past race performance. I, on the other hand, used my tried-and-true method of picking winners based on horse names I liked and silks that were pretty. 

We both had a successful day at the track. 

When we’re offering advice to clients, there will always be some clients who want to do the research: they want to review historical performances, evaluate multiple scenarios, and read every line of a proposal we deliver. For these clients, we’re providing data so they can make informed decisions.

There will also always be clients who don’t want to get bogged down in the minutia. They are turning to us as trusted financial professionals to advise them, simplify complex strategies, and guide them to the right decision. For these clients, we’re providing insight they can’t access on their own.

Both kinds of clients need our help. Our job is to recognize which type of client we’re dealing with and customize our advising approach to help them reach their goals. 

#2 | The biggest wins require complex bets.

 In 2023, a horse named Mage went off at 15-1 odds and managed to win the Kentucky Derby. A $2 bet returned an impressive $32.42. 

But the biggest winners in Derby 149 were those who correctly picked more complex bets. A $2 exacta, where you pick the first and second-place horse, paid out $330.44. A $2 trifecta, where you choose the first three horses, paid out $1,964.56. And a $2 superfecta, where you pick the first four horses, paid out $31,287.30. 

Now, I don’t suggest gambling with your clients’ retirement and making risky bets. But what I take away from these gambling strategies is that the biggest gains can be made when multiple things happen together. 

The same can be true for the retirement plans we build for our clients. The strongest plans depend on multiple solutions working together. I’d consider it a superfecta for a client to access market exposure for growth, fixed income for protection, an FIA for income guarantees, and an IUL for legacy and tax-free income.

#3 | The Derby is just the start

The Kentucky Derby is perhaps the most prestigious race in all of thoroughbred horse racing. But for the winner, it’s only the beginning. 

That’s because the Derby kicks off the Triple Crown of racing. For a Derby winner to become a Triple Crown winner, they must go on to win both the Preakness and the Belmont Stakes. It’s a tremendous accomplishment. There have only been 13 triple crown winners since 1919 and only two in my lifetime. (Feel free to use horse racing math to determine my age.)

Much like the Derby is one piece of the most prestigious accomplishments in horse racing, so, too, is retirement planning one piece in a complete savings approach for your client. Remember that long-term care, estate planning, and charitable giving are all part of what makes your client’s retirement approach a winner. 

(For what it’s worth, if I were to make a Triple Crown of retirement advice, it would be addressing Market Risk, Income Risk, and Tax Risk.)

Unlike horse racing, your clients know working with you is a sure bet. 

So don your hats and fill your julep cups. Pick your horses and place your bets.

Whether your horse finishes in the money or not, Stonewood is here to help you overcome retirement risks for your clients - the first Saturday of May and beyond.