“Fear-mongering comes from people who are trying to push a product or packaged solution,” contends Richard L. Akins, a financial planner with LPL Financial Services in Portland, Ore.
He was responding to questions about how advisors can discuss retirement income needs with clients–without being accused of fear-mongering. In the past few months, critics of retirement income planning have been hurling such accusations against the retirement industry.
The critics charge that today’s “don’t outlive your income” promotions, now favored by many retirement income professionals and providers, are stoking up groundless fear in consumers.
Even some financial advisors have called the products desk at National Underwriter to complain of this fear-mongering, as they put it. They say many clients actually die with more assets in their accounts than they held when they first retired.
Akins thinks a lot of the charges have to do with the practices, of some advisors, of just selling one-size-fits-all products and solutions rather than counseling clients about their specific needs.
“To do income planning right, you have to do a comprehensive financial plan on each individual,” he says. “And, even if a solution makes economic sense, the person’s risk tolerance may not allow for that, so you need to allow for that too.”
When plans are done correctly, Akins says, “the clients can see where their money is, where it will come from in retirement, the volatility that may be ahead and related factors.” When they see this, they have less fear, and less feeling that the advisor may be leading them astray.
OppenheimerFunds, Inc. has heard rumblings about fear-mongering, too, even from some of its own advisors.
In meetings, some advisors complain there is a conspiracy behind the push for retirement income planning, notes Kathleen Beichert, senior vice president and director of strategic retirement programs at the New York company.
They believe this conspiracy is being led by the financial services industry and the media, she continues, and they’re feeling pushed to change direction.
A survey Oppenheimer conducted supports that perception. When asked who is driving the demand for retirement income solutions, 45% of the financial planners surveyed answered “consumers.” But the remaining 55% collectively said the financial planner community (17%), financial services companies (28%) and the media (10%).
“We didn’t expect that,” Beichert says.
Discussion with planners uncovered that some believe everything they’ve been doing up to now has become irrelevant, that they now have to reinvent themselves, Beichert continues.
Her firm has responded by rolling out an advisor education program addressing those concerns. The approach is that advisors do not need to stop what they are doing, but rather expand on it. The focus is on developing strategies for the current environment, she says, citing the decline in traditional pensions and possible reductions in Social Security benefits as examples.
“Clients today are facing different variables than did previous retirees,” she says. So, “we need to start helping advisors understand that the issues and processes are now different.”
The program has four parts: materials to help advisors help clients envision their own retirement; analytic tools to use with clients for what-if modeling and related processes; a portfolio of products and strategies to help with implementation; and a monitoring component.
Increased advisor understanding leads to increased client understanding–and less fear, Beichert reasons.
Actually, many consumers already understand the need to be and feel protected in retirement, says William Raczko, vice president-global brand at MetLife in the Long Island City, N.Y., office.
MetLife research shows that today more than ever, people know they will be responsible for their own retirement. The finding resonates across the generations, from retirees to younger people, the company indicates. So, “the fear is already there,” Raczko says.
This fear is part of what he calls the “purchase barrier”–i.e., the issues sitting between intent to buy and making the actual purchase. These barriers include lack of understanding, fear of making a bad buy, and difficulty in getting started, he says, adding that the advisor’s role is to reduce this fear.
MetLife’s new ad campaign concerning retirement (called “If”) aims to support that, he indicates. “It addresses the uncertainties and possibilities in life, and also the certainties…It says, you’re not alone, and we’re here to help you.”
Bruce Long, president of Guardian Insurance and Annuity Company, New York, believes “there is no benefit to using scare tactics.”
The fear is in the individual when the person goes through the analysis the rep is doing, he points out.
It’s also there from the person’s own life experience. For instance, in 2002, half of some people’s account value was eliminated due to the stock market downturn, he says. “There is fear there.”
When the customer comes in already terrified of the future, “that’s the person’s own fear,” Long stresses. “The rep didn’t put it there.”
To illustrate, he notes that a lot of baby boomers are not even thinking about moving their money into bonds, even though retirement is approaching. “They’re still in emerging markets, because they need to make up what they’ve lost.”
That’s a fear the regulators don’t understand, Long says. “It’s driven by customers wanting more; reps can’t drive it.”
The rep’s job, he says, is to “try to balance it all out, put it in one box.” That box includes not only investment strategies for today but also lifetime withdrawal strategies, annuitization, and other ways of getting the money out in retirement.
“We want our agents and brokers to lead with the positive,” says Long. “They avoid the fear.” In support of that, the company provides reps with materials that suggest ways to phrase pertinent questions in a non-threatening way.
The industry in general doesn’t need to get the fear facts out, Long concludes. “We need to get out the fact that we have products to accommodate longevity and lifespan.”