July 26, 2006

Retirement Market Looks Slow and Steady

Results of FPA study indicate longer and more complicated process for planners--Retirement Plan Advisor, July 2006, Part 2

The majority of financial planners believe that the retirement income market will continue to grow substantially, but at a slow pace, according to a recent study conducted by the Financial Planning Association (FPA). The study, entitled "The 2006 FPA Financial Advisors' Attitudes and Perceptions about the Retirement Income Distribution Market," was sponsored by OppenheimerFunds Inc. and produced by the Diversified Services Group, Inc. (DSG).

"Extended life expectancies, a greater number of variables to manage, and difficulties in communicating with older clients, make for a much more protracted and complicated planning and monitoring process for financial planners," said DSG's Bob Vickery. "The situation has the potential to grow worse over the next 10 years as the demand for retirement income and distribution services continues to increase and compliance requirements are likely to become even more onerous."

As such, the study states, financial planners might need to reconsider their current business models in order to meet the needs of the growing and diverse aging population. Financial service companies can support planners' work in this area by continuing to develop sophisticated planning tools and services, and by communicating with each other on an ongoing basis in order to keep their business more dynamic.

"These solutions and products are already an important part of financial planners' portfolio of services," Vickery said. "Driven by consumers and their clients' needs, planners say that offering retirement income solutions is crucial to the success of their businesses?? 1/2 Financial services companies, financial planners, and technology vendors must develop more sophisticated planning tools that segment clients and provide them with credible, justifiable, tailored solution sets that are simple in concept, but adaptable to a variety of financial needs during the early and late retirement life stages."

Among other findings, the study also discovered that systematic withdrawal strategies and dividend-paying investments are by far the most commonly recommended retirement income solutions, while specific income-generating products such as annuities and Certificates of Deposits are recommended far less frequently. Also, respondents said they typically rely on existing clients to fuel their retirement income business, thereby waiting for clients to reach retirement age or leveraging existing relationships for referrals.

"While existing clients and referrals are always a good way to target this market, there is a real opportunity for planners to reach out to others who need help with retirement planning," said Kathleen Beichert, Senior Vice President of Retirement Plans at OppenheimerFunds, Inc. "Planners should look for ways to partner with financial services companies and expand their retirement income client base."

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