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Moving Into Income Planning With Boomers: Its A Change In Mindset

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How can advisors, planners and reps get going on doing income planning with baby boomer clients?

A widely held view is that, if the advisor has been focusing mostly on helping clients build up assets, it is very hard to go the other direction, advising on how to live on those assets during retirement.

But professionals in the field have a different take: Income planning is a natural part of being an advisor, they say, adding it often starts with something as small as nudging the boomer to talk about his or her approaching retirement plans.

“Whether its a new client or an existing client, I continually talk with the person about reaching personal goals, says Murat M. Dorkan, a junior partner with the Jim Elliot/Michael Shelton Agency in Towson, Md.

And, he says, “I let them know that my job is to help them achieve their dreams and goals. If the person wants to retire at 50, well find a way to do it. If the goal is 55 or 60, well do that, too. Or, if the person wants to buy a vacation home or a boat, well find a way to make that happen.”

As for the income piece of it, Dorkan says he asks clients how much they want to have in monthly income during retirement. “Then we bring the assets together and see what the persons retirement income would be like today, and we go from there.”

Dorkan has just qualified for “Silver Level” membership in the Preferred Providers Program of The Penn Mutual Life Insurance Company, Philadelphia. He attributes his accomplishment to helping clients achieve financial independenceduring the working years and as they move into retirement.

Oftentimes, he says, boomers will come to him holding several financial plans they have purchased over the years, but they havent done anything with them. “They have paid thousands of dollars for all this work, but they have never followed through,” he says.

This has led him to conclude that boomersand people generallyneed help with the follow through. That means the advisor needs to be there with the client, actually showing the person how to achieve the goals.

Paul Morris, senior vice president of the agency department at New York Life Insurance Company, New York, says this will happen naturally at the income phase if the agent has made a point of tending to all financial phases of a clients life.

That is part of core training for agents at his company, he says.

“We have found that if you build a great lifelong relationship with the client, the nudging into the income planning phase of life will be easy. That is because, if you have been keeping clients abreast of whats out there and if you have earned their trust, they will be receptive to your recommendations.”

A good time for advisors to begin the transition to income planning is during the regular account review process the advisor has with the client, Morris says. “When the clients tell you what is happening in their lives, its a natural time to broach the subject.”

For example, if a client mentions that the middle child has just graduated from college, “that tells the astute agent that the client now has funds that have been freed up.” This becomes an opportunity for the agent to suggest converting some of that money into something that can be used for retirement income, he continues.

But how does the advisor who does not have an income planning mindset begin to think and work in that direction?

Education programs, say a number of people in the field. For example, Morris says New York Life has its retirement specialists get in front of agents at least every year to talk about retirement planning issues.

“In addition, our life consultants teach agents to be there in all life change situations, like graduations, birthdays and so on.” Staying in touch on those occasions can create opportunities to start the client thinking about what is coming next, he explains.

At Prudential Annuities, the domestic annuity arm of Prudential Financial, Newark, N.J., the view is that advisor education on retirement issues is essential. Therefore, the unit has begun offering its financial professionals a retirement education programwith continuing education creditson the topic.

Called Living in Retirement, the program consists of 5 seminar-type courses that are geared to provide professionals with “the knowledge and tools they need to serve retirees more effectively,” says Thomas Winer, marketing communications manager in Prus Shelton, Conn., office. The courses are available free of charge through the firms wholesalers.

“We want to use this to alert professionals that there is a market out there that they need to pay attention to,” says Winer.

This market includes people who are already retired, as well as boomers who are nearing retirement.

Concerning boomers, he notes that some research shows that this generation is “not very good at saving, in comparison to their parents,” he says. It also suggests that income planning will be more relevant to boomers than to their parents, because boomers are living longer, fewer of them have traditional pensions and many are concerned about possible reduction in Social Security benefits, he says.

Therefore, he says, “we believe boomers will need advice on savings, and some may need an accumulation strategy for retirement, too.”

For the financial professional who works with boomers, that means he or she will need to develop a good understanding of risk management and asset allocation, he says. Those are among the topics covered in the new retirement education courses.

There are so many options that retirees should be aware of that relying on a trusted financial professional is “imperative,” contends, David Odenath, president of Prudential Annuities.

That is a point to which many experts keep returning.

Consider this example offered by Dorkan of the Jim Elliot/Michael Shelton Agency: A 54-year-old physician recently came to his office holding 4 financial plans that were drawn up in the past. None had been implemented. The man just didnt know what to do.

In response, Dorkan says, “I asked him what had been his dream for the past 30-40 years. What did he always want to do that he has not yet done?”

That question spurred the physician to talk about a vacation home he always wanted to own in Maryland. “He said he wants to hear the waves crashing on the beach,” Dorkan recalls.

Dorkan says he picked up on that desire and began talking about how to make that dream come trueand about the income the physician would need in retirement to support that dream.

The more the discussion unfolded, the more excited the client became, he says. Soon, the discussion took the direction of actually planningto buy that home and to find a way to finance the transition.

To ensure that the physician will implement, Dorkan says he plans to accompany the physician to the area to introduce him to professionals there who will help him with the purchase and related details.

In short, income planning is more that numbers and spreadsheets and pouring over the asset allocation, concludes Dorkan. “We [agency staff] do our homeworkthe allocation and asset management and so onand we get compensated for that. But we also offer a total solution, one that gets the person excited about achieving the dream. And its fun for the clients and for me.”

Dorkan says he doesnt get compensated for the personal extras, but he thinks the extras make it all work.

“If advisors just pedal products or $4,000 financial plans, someone like me will come and steal away all their business. Clients dont want to be treated like that. About 70-80% of them just want to live and have fun. They want the advisor to take care of the numbers.”

Reproduced from National Underwriter Edition, April 23, 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.