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Retirement Planning > Retirement Investing

Five Questions for the Retirement Advisor

By Ed McCarthy, CFP, RICP

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What retirement issue has hit you or your clients out of left field, and how did you resolve it?

The biggest issue has been systematic withdrawals and clients simply running out of money.

Investors may have only taken out cash, but their portfolios are down. A client’s withdrawals may be 8-10 percent of portfolio, but when the portfolio is down, you may need to adjust your withdrawals and standard of living. Get back to a 4-6 percent withdrawal rate versus 10-12 percent. Going back to work is always an option to supplement retirement income.

What prospecting methods have been most successful for you in attracting retirement-planning clients?

Referrals are our biggest method in attracting retirement-planning clients. We talk about alternative strategies and about what’s making money. We have had great success partnering with CPAs. We have begun utilizing public relations as a cost-effective alternative to marketing and advertising. We continue to have several junior-level advisors doing more traditional prospecting.

Do you face any frequently occurring retirement-planning mistakes with prospects?

Clients are under-diversified and don’t have an alternative-investment strategy. They need to be proactive and have a sell strategy.

It’s unfortunate, but many new clients simply don’t have enough money to retire and have not been properly prepared. Therefore, their expectations and standard of living are too high. We advise all clients to focus on debt reduction and be realistic about expenses.

What challenges do you face when modeling clients’ retirement incomes and cash flows, and how do you resolve them?

Bonds and dividends didn’t work this year. We are looking towards annuities and income-for-life strategies. In 2008 annuities made up 10-20 percent. In 2009 that will likely go up to 40-50 percent. We must offer client multiple options and promote alternative strategies.

What mix of products and solutions do you use most often and why?

The mix has changed significantly this year. We have begun to move away from small- and mid- size caps. Annuities’ income has become part of life strategies along with non-traded REITs. We continue to look towards large U.S. companies, dividend-paying stock, municipal bonds, high-yielding corporate bonds and high-yield bonds.

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