NAVA And InFRE Rolling Out Retirement Income Management Course

The challenge, he continued, is that most of todays financial advisors and planners lack the knowledge and expertise to provide the guidance people need to convert retirement assets into retirement income.

As a result, retirees face a “significant risk of a dramatic decline in their standard of living,” he said.

To help advisors provide guidance in this area, the certificate course suggests a 6-step income management process (see chart). “This is a process that goes on continuously,” said Logan, adding that a clients plan is “defined and redefined” as time goes on and circumstances change.

A key part of the process is identifying the post-retirement risks facing retirees, said Richard P. Austin, an industry veteran based in St. Petersburg, Fla., who is a financial services consultant on retirement income planning.

These risks include longevity, family issues (divorce, second families, etc.), health and long term care, business and public policy, and investments.

“There are a lot of myths associated with longevity,” Austin pointed out. For example, people may assume they will live to their life expectancy. But, in reality, he said, “only 4% of deaths occur at that point. That means the myth is wrong about 96% of the time.”

Also, as people live longer, there is a growing probability that LTC needs and issues will occur, Austin said.

As for financial modeling, he said there are pros and cons. Monte Carlo models do spur people to think in terms of probabilities, Austin allowed, and they do make it easy to see the result of changes in variables entered into the model.

But, he asked, “Can a client grasp the difference between a 60% chance and a 70% chance of achieving a goal?” Additionally, he said, the models are “not very likely to predict a [stock market] crash like the one in 87.”

Other retirement income points to cover with clients include tax issues, required minimum distribution issues, Social Security, portfolio allocation and systematic liquidation of assets, he said.

The new course runs for 12 hours and includes testing at certain points. Students receive a certificate upon successful completion.

Reproduced from National Underwriter Life & Health/Financial Services Edition, March 25, 2004. Copyright 2004 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.