“The best thing we can do to protect our clients is first to build a floor, then expose them to the upside” of the markets, says David Macchia, founder and CEO of Wealth2k. Speaking during the Retirement Income Symposium (RIS) on Nov. 9 in Chicago, Macchia reported to the 120 attendees at the RIS (sponsored by the Investment Advisory Group of Summit Business Media) that the systematic withdrawal approach to retirement income has fallen out of favor with advisors. A recent Financial Planning Association (FPA) survey, he said, found that just four out of 10 advisors are now using that traditional method of withdrawing income from a retirement portfolio.
The “bucket” approach is now favored, Macchia (left) said, and for good reason, but learning how to use buckets meaningfully, to build that floor and then arrange buckets that can provide portfolio growth, requires more education for advisors. It’s also important, he said, to illustrate to clients how the use of different buckets will “align with client’s needs and objectives,” which will help those clients understand and embrace the retirement income plan at both the point of sale and throughout the life of the plan.
To help educate themselves on the best ways to provide retirement income for clients, Macchia recommended advisors consider getting the Retirement Income Industry Association’s Retirement Management Analyst (RMA) designation. He said the RIIA’s designation “will be an extraordinarily important designation,” moving forward, not least because the program “teaches you how to allocate across risk, not just assets.”
He also put in a plug for independent advisors’ ability to gather retirement assets. “You have to be the best at communicating—it’s possible for you to communicate better than Fidelity, even if it’s not likely that you’ll ever manage more money than Fidelity,” he said to audience laughter.
To do so, however, “you need tools,” Macchia said, primary among which is to “use the Web in a meaningful way. Everyone who is the best prospect for your retirement income business uses the Web,” citing Pew research showing that high-net worth individuals are inveterate users of the Web. “There are clients on the Web willing to be educated, willing to be contacted,” he argued, recommending as well that advisors “embrace high-end multimedia and social networking tools.”