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The New Retirement Advisor

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In the best of times, helping clients make the successful transition to retirement can be a complex and demanding challenge for advisors. The financial and personal issues involved with longevity planning are often wrought with great emotion, anxiety and uncertainty. So it is not hard to imagine how the unprecedented upheaval and turbulence in the financial markets this past year have further complicated the way advisors manage the ongoing delivery of retirement income and transition support for their clients.

In periods like this, it may be hard for financial advisors to find the time or energy to look past the seemingly endless stream of reports highlighting volatile capital markets, government bailouts and generally unsettling economic news. Yet one clear lesson that has emerged from all this negativity is that clients cannot adequately prepare for living extended lives in retirement without the guidance of experienced and knowledgeable professionals.

We recently spoke with a leading advisor who focuses on retirement income. She told us her existing clients were causing her phones to ring off the hook, with some wanting modest reassurance while others were in sheer panic. The advisor pointed out that most of the retirees she serves have weathered the storm well compared to their peers. Many of her clients must be talking to their friends and colleagues, as referrals are also coming in rapidly. In fact, this advisor believes that despite the unsettled markets, 2009 will be a banner year for business.

The demand for professional guidance to help aging boomers live longer, more engaged lives should well outpace the supply of qualified advisors over the coming decade. But how can financial advisors best prepare to capitalize on the opportunity to engage these clients?

Over the coming months, we will outline for readers of Research many of the best practices we have identified regarding how retirement income and transition support is evolving. These insights emerge from research we have undertaken as consultants and market analysts working with a wide spectrum of advisors, broker-dealers and service providers, and detailed in our report released in Q3 2008 entitled Advisor Best Practices: Delivering Retirement Income and Transition Support.

One element that defines many of the leading retirement practitioners is that they offer capabilities that go far beyond traditional investment management or retirement income assistance. According to one advisor, it is clear that his financial planning clients — representing almost 65 percent of his client base — fare better than non-planning clients. Bolstered by this validation, the advisor is pushing to convert all his clients to holistic advice. The advisor takes the position that he can’t add sufficient value by addressing just part of the client’s situation. Instead, the advisor believes he must take on a more central role that deals with a breadth of client issues and concerns. And based on the new referrals coming in to the advisor, the broader scope of support is what clients want.

Obviously, advisors can’t and don’t minimize the importance of sound investment and income planning for their clients. However, the support delivered is much broader in scope than investing or income creation and reflects an emphasis on resolving the various complexities involved in retirement planning and living. We refer to this more extensive approach as longevity support.

Advisors tend to see their core value proposition as being the trusted guide for clients who are at a loss for navigating the multitude of challenges that are associated with retirement.

As many advisors note, retirement clients tend to have far more complex, demanding, and customized needs compared to younger, accumulation-oriented clients. Yet few clients can articulate their real needs regarding retirement or recognize the breadth of topics to be addressed.

Typically, advisors delivering longevity support will deal with issues that include personal finance, asset management, income creation, insurance coverage, estate and wealth transfer, charitable giving and health protection, notably long-term-care insurance and other medical policy supplements. In addition, questions related to health services, elder care, family dynamics and personal development are often being supported by advisors. Few of the advisors deliver the totality of longevity services, but instead tend to tailor their support to be consistent with both the type of client they serve and the advisor’s own personal experiences and interests.

The by-product of expanded services is a deeper relationship with the client. An advisor once noted to us that establishing deeper relationships is a slippery slope. The more you know your clients, the more they want — and expect –from you. Even advisors who position themselves as investment managers admit that clients today are asking for more support. As the coming wave of boomers faces retirement, these services are likely to be crucial to differentiating and sustaining a practice.

Advisors follow a mix of approaches to offering this broader level of support. Some have added specialists to staff such as a gerontologist or medical care professional. Others are creating a family office structure, with full access to a variety of professionals housed within a practice. More often than not, however, most practitioners rely on a trusted network of outside contacts to supply the expertise and implementation for various solutions. As one advisor told us, his network of professionals goes beyond accountants and attorneys to now include funeral home directors, building contractors, eldercare specialists, career coaches and family counselors. The role of the advisor is becoming the “general contractor” or advocate for the client, identifying and bringing to the table third-party support that can address the uniqueness of particular situations.

A major challenge will be developing expertise among less experienced advisors who want to extend their support to reflect the broader demands of clients. Many of these advisors do not yet have sufficient experience or a deep enough knowledge base to act as the client’s trusted guide in areas such as health care, gerontology or human capital. It is likely that broker-dealers and solutions providers will be called upon to provide platforms, tools and training to help bridge these gaps, enabling advisors to broaden the scope and content of the support they offer.

In the coming months we plan to provide actionable insights based on current and future best practices for issues ranging from client development and discovery to expanding expertise and client support.

Advisors wishing to share experiences or practices in delivering retirement income and longevity support are welcome to contact the writers at [email protected] or [email protected].

Dennis Gallant is president of GDC Research. Earlier, he was a director of Cerulli Associates and a vice president for Funds Distributor in Boston.

Howard Schneider is the founder of consultancy Practical Perspectives near Boston, worked previously for Scudder Investments and has served as chairman of the Mutual Funds Education Alliance.


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