The Retirement Toolkit

Research: How do advisors need to change their business model as their client mix moves from a predominantly accumulation-oriented population toward distribution?Lofties: The wealth management business model — one that provides clients holistic support for all financial related issues — is an optimum model for advisors to move toward. Wealth managers are in an optimum position to positively impact the lives of boomer clients and they will be financially rewarded for doing so. The breadth of their service offering will protect them from the decreasing revenue streams accumulation specialists will encounter as boomers draw upon their accounts to produce income. We believe this transition is so important we have partnered with CEG Worldwide to make available a customized version of their “Cultivating the Affluent” coaching program to help our advisors make this transition.

What’s the response been like? We basically subsidize the cost of that program for our advisors to attend. It’s a year-long program and we can only take 30 at a time. The first group started in March 2006, so they’re about 15 months removed from it now. They’re seeing fantastic success.

What is Omaha, Neb.-based Securities America doing to help advisors shift into the distribution mode?There’s a lot of philosophical talk about needing to get ready for this business, but at the end of the day, what advisors are really craving is actual tools and strategies to help them manage the discussion of how to provide that paycheck to their retired clients. That’s what we’ve tried to do. It’s very practical: how you actually set up the accounts, what products you use to set up the income.

So what’s in the tool kit?Our advisors have repeatedly expressed their frustration concerning the lack of tools that have been provided to them by the industry to assist the boomer market. So Securities America’s focus has been on developing tools that advisors can use right now to serve their clients. We call these tools our NextPhase solutions because they help clients move from accumulation to the next phase: distribution.

The most widely accepted tool we have introduced to our advisors is the Reliability of Income Profile. This profile presents a ground-breaking way of thinking when it comes to risk profiling. For years, on the accumulation side, we have attempted to measure a client’s ability to tolerate volatility in their portfolio and we have constructed portfolios accordingly. But as boomers move into distribution, we need to recognize that measuring a client’s ability to tolerate volatility in their income stream is just as important. This is the first tool in the industry that provides a methodology for determining a client’s need for guaranteed income and provides guidance to an advisor as to what portion of a boomer portfolio needs to be dedicated to a guaranteed income source such as a VA GMWB or SPIA, and how much should be allocated to non-guaranteed sources.

How does that work?It’s a 17-page questionnaire. It’s different from a normal risk questionnaire, which in the accumulation phase determined how sensitive an investor was to volatility. “If you’re really aggressive, maybe you’ll put 100 percent into equities,” that kind of thing. However, the normal questionnaire is really only appropriate to accumulation, so we’ve taken that same mindset to distribution. Now, investors are concerned with the risk of fluctuation in the income stream, and that’s what the profile measures. We announced it in June and can’t keep it on the shelves.

What else have you come up with?Securities America has also created the Imagine…Your Life Without Limits book to get boomer clients talking about their most closely held dreams and goals. We are also offering a corresponding training course called “Painting Your Client’s Retirement Portrait.” This course teaches advisors how to best use the Imagine book during client interviews. As clients move into the next phase of their lives, they are most certainly concerned about their money, but they are also interested in adding more meaning to this phase of their lives. This cutting-edge personal reflection tool will help advisors initiate better conversations with their clients.