Financial professionals meet the needs of the retirement market by providing client services–e.g., education, advice and planning–and selling investment and insurance products.
The clients benefit when the advisors guide them through the process of deciding when to retire, how to finance the rest of their lives, and how to best prepare for unforeseen financial events.
Advisors and the institutions with which they do business profit mainly from product sales and asset management. They do not typically derive significant profit from education and advice. Yet, those advisors who provide in-depth retirement planning are very likely to garner product sales, according to as yet unpublished research done by LIMRA International, Windsor, Conn., in 2006. The process entails the advisor taking several steps, as follows:
Build and strengthen relationships. Comprehensive retirement planning necessarily entails a detailed review of clients’ entire financial situation (assets, income, debt, employment, etc.) as well as their goals, plans and concerns.
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Become a trusted PFA. Such intimate discussions are more apt to occur under conditions of trust. Advisors should therefore strive to be considered personal financial advisors (PFAs) by their clients, signifying a deeper, longer-lasting relationship with their clients.
Forging relationships with clients as early as possible, conducting annual review sessions and growing one’s knowledge and skill set to encompass retirement issues, will position advisors for helping clients when they ultimately retire.
In the LIMRA survey, nearly half (47%) of consumers ages 50 to 70, with at least $50,000 in household financial assets, claim to have PFAs. Retirees were more likely than pre-retirees to have PFAs (50% and 42%, respectively). It is possible that many retirees who did not have PFAs prior to retiring realized that they could use some help after retiring. While having a PFA is strongly associated with household investable assets, 42% of millionaires surveyed do not have PFAs.
Create formal, written plans for management of income, assets and expenses in retirement. It is unlikely that individuals will manage these areas without advisors helping them through the process.