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Retirement Planning > Saving for Retirement

Consolidate and Refer

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“If you look at an advisor’s practice today and what’s going to happen in the future, there are some outside pressures that will affect the practice of that advisor,” remarks Dave Liebrock, executive VP of Fidelity Investments Institutional Services. He’s talking about the difference between retirement savings today and what they are likely to be in the near future–predominantly defined contribution plans. “[Clients] accumulate these assets and come to retirement, and they want know how much to take out and what they should be doing with the money.” To boot, the age wave of boomers will contribute a great deal to this changing landscape of the financial planning business. “You look at the baby boomers, who for the next 20 years are going to be a predominant source of an advisor’s business,” says Liebrock, “and the advisor’s practice is going to be based a lot on helping a majority of their aging clients understand how they should be paying themselves in retirement.” This transformation in who clients are and what they want from an advisor provides a great opportunity, he argues, but at a cost.

Fidelity Investments introduced a report in late April revealing that advisors who offer retirement income planning services have found that their clients are more satisfied, consolidate more assets with them, and provide more referrals for new business. Conducted by NFO Research on behalf of Fidelity from July 5 to July 12, 2006, this online survey included 813 investors between the ages of 55 and 70 with investable assets of $250,000 or more. The report, Adapting a Practice for Retirement Income Planning, found that those advisors who have built retirement income plans for their clients have attained a 50% increase in “very satisfied” clients. Seventy-seven percent of those same clients indicated they would be willing to move all of their assets to one advisor, and a considerable 95% said they would refer someone to the advisor. Furthermore, 94% of advisors surveyed by Fidelity expect their business to grow over the next five years as a result of offering retirement income planning, with almost a third expecting business to double.


More Complex, More Time-Consuming

So, what’s the downfall? Retirement income planning is more complex than asset accumulation, requires more time and research, and provides less compensation, due to conservative portfolios and a shift to products that generate lower commissions. “The thing that an advisor should consider is that this is a longer process with a client, but I believe the benefits far outweigh that with consolidation of assets, and referrals, and client satisfaction,” notes Liebrock. In fact, as indicated by the report, advisors may not have much of a choice when it comes to keeping up with the changing environment–they will have to do it to stay competitive. “People that are five or 10 years from retirement are going to want to start understanding how they will be able to pay themselves in retirement,” explains Liebrock. “If they are talking to an advisor today who doesn’t want to talk about that, they’re going to go find someone who will talk about it.” According to the study, clients are ready to talk about retirement-related issues, yet advisors aren’t providing enough information. For example, 28% of respondents are looking for advice on long-term health care, while only 8% are actually receiving that advice. “These conversations require an advisor to acquire that knowledge or outsource that knowledge and someway bring that expertise into their office. It’s about educating yourself and communicating that to your client,” states Liebrock.

The Fidelity report also presents “Five Key Strategies” for helping advisors successfully address the changing retirement market:

  1. Become proficient in all things retirement, creating a retirement specialist brand;
  2. Use health care knowledge as a differentiator;
  3. Combine income planning with effective client management strategies;
  4. Evolve to a more efficient, profitable business model;
  5. Refine client acquisitions strategies for retirement income planning.

According to Liebrock, the way an advisor positions himself in the marketplace to potential customers is important, particularly branding yourself as a retirement specialist. “Consumers are attracted by comfort level, with regards to a brand. If it’s not really carved out, as to what you’re offering to a consumer, you may be missing out on opportunities,” he says. “I think that expanding your practice beyond the traditional investments and looking at issues that retirees focus on, such as retirement healthcare issues, is going to be important as well.”