To The Editor:

Re: “As Boomers Near Retirement, Where Are All The Income Specialists?” by Linda Koco in the March 3, 2003, issue.

This article is right on the money! Most adults, but particularly older baby boomers, are screaming for help from an advisor who possesses the “three Cs”–competent, caring and comprehensive. An advisor who wants to fill this need for “income planning” has a rare opportunity to help a lot of people in a profound way and in doing so will be rewarded in a fashion that supersedes just “making money.”

Below are the three essential principles that one will want to consider in becoming such a professional:

Principle #1–A systematic process of planning must be created. This will form the template for how the advisor will operate when doing “income planning.” This process will be modified from client to client due to individual circumstances, however, the basic “template” will stay the same. This system will offer momentum during the planning process as it becomes “second nature” to the advisor as well as any staff members that are involved.

Principle #2–It is imperative that this “system” is arranged in such a manner that “the plan” comes before “the product.” This is critical! Whether or not the advisor is compensated from fees to prepare plans and/or commissions or fees from products is not what matters most. What matters most is that the generic plan is arranged and “fine tuned” consistent with what the client wants out of life, before any specific product recommendations are discussed.

Principal #3–The advisor will want to utilize some type of probability analysis when designing the technical portion of the “income plan.” Many software programs use “fixed return assumptions” in that they are assuming that the equity/fixed income markets will deliver the same return each and every year. This may lead to the clients feeling a false sense of security as we all know the capital markets do not behave that way. Some type of “probability analysis” tool (i.e., Monte Carlo simulation) that illustrates how the plan may hold up under a variety of possible market conditions offers an improved advice process. While we still cannot guarantee anything for a client when it comes to overall “income planning,” these tools offer a perspective that is more in sync with how the world really works.

Evan M. Levine, CLU, ChFC
MML Investors Services Inc.
New York, N.Y.


Reproduced from National Underwriter Edition, May 5, 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.