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Retirement Planning > Retirement Investing

Five Questions for the Advisor

By Ed McCarthy, CFP, RICP

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Mitch Slater, The Slater-Trainor Group, Senior Vice President – Wealth Management, Smith Barney, Florham Park, N.J., shares his views on retirement income and retirement planning.

1. Which retirement issue has hit you or your client out of left field, and how did you resolve it?Slater: The S&P 500 standing virtually still for the last 10 years has affected our clients’ psyches and their retirement income goals. Most were used to the typical 8 to 10 percent average returns, and their previous advisors were factoring in those numbers and doing linear planning.

We’ve introduced them to Monte Carlo simulation, which computes the probability of an outcome, such as the value of your nest egg at retirement. We believe that way of thinking gives clients a more realistic glimpse of the future and what it will take to get there.

2. Which prospecting methods have been most successful for you in attracting retirement-planning clients?Education has been our best prospecting tool. We conduct monthly conference calls to educate clients and prospects on a variety of important issue, mostly retirement planning. Topics range from long-term care to Social Security to understanding Medicare. For example, we just did a conference call for human resource directors explaining IRA rollovers.

3. Do you encounter any frequently occurring retirement planning mistakes with prospects?One common mistake I see is that people think retirement signals the end of work, and that’s not accurate. Surveys have shown that most [Baby] Boomers will work after retirement. People also think their expenses will go down in retirement, but they only go down if you spend less money.

4. What challenges are you encountering in modeling clients’ retirement incomes and cash flows, and how do you resolve those challenges?It’s a challenge to attain a yield with minimum risk in a relatively low-rate environment. A two to three percent yield is typically not enough for most people to avoid outliving their money. We’ve chosen to use a barbell approach. On one end, you have the more conservative fixed-income alternatives, and on the other end, you have some of the higher-yielding vehicles.

5. What mix of products and solutions do you use most often in your work with clients, and why do you use those particular products and solutions?We use exchange-traded funds, municipal bonds, closed-end funds, preferred securities and annuities. That’s the main menu we follow.

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