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Numerology: No One Way

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DC Research and Practical Perspectives, two research companies headed, respectively, by Dennis Gallant and Howard Schneider, released in April their most recent findings–”Examining Best Practices in Constructing Retirement Income Portfolios”–on how advisors are conducting retirement income planning in the real world. Following up on a late 2008 report, “Advisor Best Practices: Delivering Retirement Income and Transition Support,” the researchers, who have been presenting some of these findings in Investment Advisor’s Future of Retirement Planning series of workshops, discerned a number of core themes that have emerged in the midst of the current economic and markets crisis. They include:

o There is no universally accepted methodology for building retirement income portfolios or sustaining income, though there are two primary methods: a traditional risk-adjusted total return approach, and a more income-oriented pooled, or bucket, process.

o Building retirement income portfolios is a highly complex, time consuming, and customized endeavor, as advisors tailor delivery to the specific needs and circumstances of each client

o In building retirement income portfolios, advisors focus more on process than on products, as they work to integrate multiple solutions that serve client needs

o Advisors follow a common series of steps in building retirement income portfolios, ranging from Client Discovery to Investment Planning to Implementation to Monitoring and Adjustment

o Retirement income portfolios require continuous support and maintenance, with changes to personal circumstances and the overall market environment driving ongoing review and periodic modifications

The researchers suggest that, in general, advisors view building retirement income portfolios as much an art as a science.

Further information is available from Gallant, the former Cerulli researcher, at [email protected].