As Boomers Near Retirement, Where Are The Income Specialists?

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National Underwriter has given considerable ink to the financial needs of baby boomers as they approach retirement. Much of the discussion leads to the same conclusion: Pre-retirees need income planning advice, and so do those who are already in retirement.

This suggests that many consumers soon will need the services of income specialists–people who know how to help retired folk live on the money they have accumulated.

My question is, where is this army of specialists? Yes, some financial planners and advisors do till this field, but I am told their numbers are not exactly legion. This needs to change. Well revisit this point later. First, a refresher on the issues.

In the articles referenced above, NUs writers and contributors have examined the boomer demographic–the 77 million or so people born between 1946 and 1964. They have looked at the boomer lifestyle–diverse, by any measure. And they have enumerated the many retirement funding challenges facing boomers.

These challenges include: the potential for long term care or critical illness events; the uncertainty about Social Security and Medicare; the decline in traditional pensions; the expected “transfer” of trillions of dollars to boomer financial accounts via inheritance, 401(k) rollover, sale of homes, and more; and boomers lack of expertise in managing lump sums of money.

Again and again, experts say a crisis is looming. If boomers dont get on a sound retirement income course, the experts warn, boomers will sink in a quagmire of financial mismanagement. Their golden years will turn dark and cold.

Such dire predictions certainly speak to me. Ive seen more than a few people of my acquaintance make bad financial decisions in retirement, or at its doorstep, that threaten their financial security.

For instance, a well-educated 80-something gentleman in my community recently told me this story. He wanted to “set up something” that would drop x-amount of dollars into his checking account every month. What he bought–on the advice of the “nice young man”–was a deferred annuity. He later reviewed the policy, checking out each provision. The more he learned, the more upset he became. “Thats not what I wanted!” he shouted.

It turns out that what the man wanted was what his friend had–an income annuity. He just did not know the word for the product other than the word “annuity.” Meanwhile, the “nice young man” did not work with income annuities, so he said he did not think to offer one to the nice old man.

This is not the first such story Ive heard, and it probably wont be the last.

Of course, anecdotes do not a trend make. I have also heard people tell of planners who “really did a great job in helping me sort out everything.” Some people swear by such planners the way young parents swear by their pediatricians. It is a passionate engagement, borne of relief, security, and trust.

Still, from talks with many financial services pros, I am coming to the conclusion that such income planning experts are hard to come by. Many, like the “nice young man,” just do not work with income planning scenarios.

This worries me, for as boomers move into retirement, the demand for sound income planning services is likely going to skyrocket–due to those financial issues listed earlier.

Naturally, some boomers will try to wing it on their own, guided by their wits, their consumer magazines, and their always-on Internet connections. But others will do as the nice old man did: rely on the advice of a financial person of their choice.

This poses the question: If financial representatives are not themselves educated on income planning, how in the world can they help the clients who need this advice?

They could, of course, refer clients in need of such advice to experts in the field. But that brings up a second question: Where are the income specialists to whom they can refer the client?

Today, a few reps do claim such expertise. So do a small band of third-party trainers, financial modeling firms, actuarial services, insurance brokerages, and insurance and financial companies that are approaching this field in trailblazer fashion. A gold star goes to each of them.

Applause, also, to the National Association for Variable Annuities, Reston, Va., for sponsoring a national conference on this topic for the past few years. (The next one begins March 30.)

But income expertise is still in its infancy. If you have any doubt, just check your local telephone book listings or the topics chosen for your professional association meetings. What the industry needs to do is provide more income training and education, more income product development, and more promotion of income planning services.

Some insurance company executives tell me they agree. But, they say, “now is not a good time” to step whole-hog into the income arena. They say the economic downturn has drained resources to the point that their organizations absolutely must stick to their knitting–i.e., products and strategies already on deck.

When resources are diminished, sticking to knitting is often the preferred course. But in this case, it may be risky.

When the market improves, what will these organizations do to compete with those already in the income planning lead? How will they meet the pent-up demand from clients? How will they avoid making mistakes of the kind made by the “nice young man”–mistakes that could end in costly lawsuits? How will they meet their mission to provide full financial services for the continuum of life? How, how, how?

Insurance, it is said, is in the business of risk-taking. This is a good time to give some life to that concept. Since money is tight, perhaps allocating just a small percentage of resources to income planning would be best. Perhaps limit the development time. Perhaps put the emphasis on calculated risk-taking. But do move forward.

Your firms future health, and that of your older clients, may well hinge on this.


Reproduced from National Underwriter Edition, March 3, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.