Seventy-five percent of plan participants switch their primary financial advisor or initiate a relationship with an advisor within five to 10 years of retirement. One explanation for this migration is that clients don’t think their advisors understand the difference between investing for retirement and managing income from investments during retirement.
The baby boomer generation began turning 60 in 2006 and will soon retire in large numbers. They will make decisions about how and when to take distributions from their retirement savings. Financial professionals who have developed accumulation programs for these clients now need to focus on the payout phases of retirement.
Clients frequently change advisors at or near retirement, often to an advisor who contacts them within 90 days of taking a retirement distribution. When it comes time for your clients to make a retirement plan distribution election, they will only call you if they know you are prepared to help them with this specialized decision.
With the baby boomers beginning to retire, now is a great time for you to refocus yourself in the eyes of your clients as a financial professional specializing in retirement income management.
Developing a Marketing Plan
You can significantly increase your sales by developing a coordinated marketing plan focusing on retirement income management. As you devote time and resources to this market, your clients and your community will come to see you as a specialist in this field.
The goal of the plan is to establish you as a financial professional who is a specialist in retirement income management. Sales of life insurance, annuities, long-term care insurance and other investments will naturally evolve from the plan.
Communication with existing clients is a good place to start. Effective use of a client management system will save you time and ease the process.
You will already have the birth date of each of your clients, but you probably will not have not collected and entered a retirement date for each client. Unless you have the manpower to call each client and ask for a projected retirement date, assume that each client will retire at age 65, then enter the correct projected date into your system as you meet with each.
Five to Ten Years Prior To Retirement
If clients are at least 10 years from retirement, indicate a date 10 years prior to retirement to contact clients to schedule an appointment to review their retirement accumulation progress and to discuss the concept of pension maximization. Also, begin annual reviews if you are not already doing them. If a client is pre-retirement, but closer than 10 years to retirement, immediately schedule a review to discuss pension maximization.
Why pension maximization? One of the most important choices your clients make as they retire is their pension payout option (i.e., single life only or joint-and-survivor). Not only will this decision determine the amount of pension income your client will receive, it is often a choice that, once made, is irreversible.
In the five to 10 years before retirement, regularly send your clients information on:
? Retirement income management
? Pension maximization
? Retirement risk management (life insurance)
? Social Security options
? Long term care options
Mailing campaigns can get expensive; consider developing email lists of clients at particular ages and using those lists to effectively distribute pertinent information. Most clients are technologically proficient these days.
Two Years Prior to Retirement
Forty-three trillion dollars will be distributed from retirement plans over the next 20 years. Nearly all of it will be either directly transferred or rolled over into IRAs to continue tax-deferral on those assets. Many financial professionals are shocked when long-term clients who retire don’t call them before making this critical financial decision.
Your clients simply don’t connect making this decision with the accumulation planning you have done for them in the past. Yet, this could be the single, largest financial transaction that most of your clients will ever make.
Two years prior to retirement, begin a drip marketing campaign–sending a letter, brochure, or flyer to the client every 2 to 3 months–on lump sum distribution planning. Clients need to hear from you at least 3, and preferably 5, times in the 24 months before they retire if you expect them to call you to help them manage their lump sum distribution when they retire.
Five to 10 Years After Retirement
Retirees today have a very real fear of outliving their income. For many, this is a greater concern than health care costs.
Investing for retirement requires different strategies than investing during retirement. This is a fact. If you focus only on accumulation planning with your clients, they may not perceive that you understand the difference between the accumulation of assets and the management of income from those assets!
The 5- to 10-year period following retirement is one of exhilaration and discovery for retirees. A retiree’s spending during this time may actually exceed their pre-retirement spending. If you don’t do income management planning for them, they may panic and seek someone else’s advice about making their money last. But if they understand the different stages of retirement and have an income management plan for each stage, they will face retirement with confidence.
Qualified retirement plans–traditional and Roth IRAs, 401(k)s, etc.–are remarkably efficient accumulation vehicles. Untaxed dollars are used to fund the plans, and taxes are deferred as long as the funds remain in the plans. At death, however, qualified plan accumulations may be subject to double taxation–both income and transfer taxes.
That’s not all. After your clients reach age 70 1/2 , they must also take required minimum distributions (RMDs) from their qualified retirement plans. So, whether they actually need the income or not, the IRS mandates that they draw down the account each year.
If your clients do not take the distributions, they will pay a punitive tax penalty! You can show them a way to use the required minimum distributions to maximize the inheritance they leave to heirs.
The capital transfer strategy lets them place their retirement dollars in the most tax-efficient vehicle for transferring property to heirs: A life insurance policy. By using their required distribution to purchase life insurance that benefits their designated beneficiaries, they can maximize their legacy and avoid transfer taxes. Properly designed and funded, life insurance passes tax-free to beneficiaries–preserving the legacy they intended for them to enjoy.
Each of the separate marketing campaigns designed for your existing clients can also be used to prospect for new clients. One of the most cost-efficient ways to reach new prospects is through seminar selling. Consider starting a seminar marketing campaign by cycling the following four topics on a quarterly basis:
? Pension maximization–Target prospects ages 45-60.
? Lump sum distributions–Target prospects retiring within 2 years.
? Retirement income management–Target prospects ages 55-75.
? Capital transfer strategy–Target prospects ages 65-80.
There are many different ways to do seminars. If you do not currently do seminars, consider starting small and give yourself time to build confidence and experience. Hold the seminars in your conference room, at a public library, or other community property that charges only a small fee for the use of their facility.
Keep your invitation lists manageable so you can do effective follow-up. Reward existing clients (small gift or free service) for bringing other prospects similar to them. Also, purchase small (100-200) lists of names of qualified prospects that reflect your desired age bracket and financial demographics. Advertise locally, clearly defining the age of the desired attendee and the subject matter of the seminar.
Focus your resources on getting the right prospects to your seminar. Most companies you do business with will provide you with seminar materials, checklists and invitations.
With the baby boomers beginning to retire, the competition for clients will continue to rise. Be the advisor clients are changing to–not the one they are leaving! Good Selling!
Donna Sinor is assistant vice president and director of advanced markets for Columbus Life Insurance Co., Cincinnati, Ohio. She can be reached at .