Michael Henkel likes to say that “Retirement is the most difficult investment decision an advisor will ever make.” As co-head of Envestnet PMC, this former president of Ibbotson Associates is responsible for assessing and implementing the investment tools advisors use on the nonproprietary Envestnet platform, and for more than 10 years he has focused on ways to solve the retirement income puzzle.
In his keynote speech at the third annual Retirement Income Symposium in Chicago on Monday, Henkel first laid out the scope of the challenge and the opportunity for advisors. He noted, for example, that by 2030, 30% of the population would be in retirement, with 2.4 million having investable assets of at least $1 million as they moved into retirement, and that an average of 4.3 million Boomers would be turning 60 every year for the next 18 years.
While arguing that “money will be moving,” and acknowledging that for many advisors, retirement income is still “more product sale than solution,” Henkel then provided what he called a “shopping list” of important items advisors should use when evaluating any retirement income solution.
The five-step list includes:
- Gathering information, which is where data aggregation of all a client’s accounts is highly desirable;
- Product and asset selection, where he acknowledged that “people like us need to provide better tools to people like you,” especially in the area of behavioral finance;
- Implementation of a solution using those products;
- Managing the solution, which must include tax management, and finally;
- Reporting, where an outcome-oriented advice approach will help “make assets sticky.”
Henkel (left) said there remains a need for advisors to be better educated on retirement income, but also that there are “lots of things we need to do as tool providers.” He did mention some interesting product solutions, particularly hybrid products such as the TIPS ladder from PIMCO, and a commission-free single premium immediate annuity (SPIA) in the works from New York Life.
The day-and-a-half Symposium continues with presentations by Mark Tibergien, Mark Cortazzo, Blaine Aikin and Susan Hirshman.
Henkel is a regular blogger for AdvisorOne.com. His most recent blog is on the lessons learned for active asset allocation from the 2008-2009 financial and markets crisis. During his session, he disclosed that he’s working on a future blog that will address some of the capital markets assumptions that are used in Monte Carlo simulation.