Mutual fund companies have long excelled at a core competency: providing advisors with investment planning strategies, information and services. But with a growing number of retirees now looking to cash out their nest eggs, or else keep assets intact for the next generation, advisors are increasingly turning to these companies for aid with distribution and wealth transfer planning.
Yet, interviews with National Underwriter suggest that firms are coming up short. While many mutual fund companies now provide tools and services to help advisors with post-accumulation techniques and services, the offerings are mostly general in nature. When formulating specific client recommendations, particularly those involving advance planning techniques, advisors still largely have to rely on their own resources or the expertise of other professionals, such as estate planning attorneys.
Advisors say there is a growing need for wealth transfer information and services because of the generational shift underway. Over the coming years, baby boomers stand to inherit an estimated $10-$40 trillion in assets. And as the leading edge of boomers now turns 60, many are transitioning from accumulation to distribution planning.
“Now that the boomers are moving into a distribution phase, it behooves everyone to focus on appropriate distribution techniques and tactics, in addition to estate planning,” says Vince Clanton, a financial planner and principal of The Chancellor Group, Atlanta, Ga. “All of the [mutual] fund companies are starting to address this issue, but I think we’ll need more sophisticated modeling over the next couple of years.”
Mark Stein, a financial planner and president of Aegis Financial Group, Phoenix, Ariz, is less charitable in his assessment. “We don’t rely on the mutual fund companies for information [on wealth transfer techniques],” he says. “The assistance they provide is minimal or basic, at best. When it comes to implementing a Stretch IRA or designating an estate beneficiary or trustee, they’re pretty much useless.”
In a 41-page report released this month, “Intergenerational Wealth Transfer: Fund, Companies, Baby Boomers Poised for Asset Shift,” New York-based Corporate Insight gave the firms mixed reviews with respect to online offerings for advisors. Of the 16 mutual fund companies that Corporate Insight tracked, 6 failed to provide any information regarding estate planning, beneficiaries, Stretch IRA products or other legacy-related issues. Of the remaining 10 firms, only 5 provide “adequate” information, tools and collateral materials in well-defined and easily located areas on their web sites.
In evaluating the companies, Corporate Insight explored 4 on-line resources: (1) strategies for implementing wealth transfer plans, such as step-by-step guides on conducting beneficiary reviews; (2) wealth transfer tools and calculators; (3) collateral and educational materials for advisors; and (4) the accessibility and organization of online content.