In response to the market downturn, financial advisors are adjusting how they construct and manage portfolios to meet the income needs of clients living in retirement, says a new report published by GDC Research and Practical Perspectives, independent consulting firms working with wealth management providers and distributors of retirement products and services.
The 173-page report, “Examining Best Practices in Constructing Retirement Income Portfolios,” reveals great diversity in approaches, products and providers that advisors use to meet client needs for retirement income. Overall, one in seven advisors has made a significant change in how they construct retirement income portfolios, and 77 percent have changed how they allocate assets in response to the capital markets environment. Of the advisors surveyed for the study, 36 percent are less confident now than they were one year ago in their ability to manage assets for retirees. The findings indicate that advisors perceive building retirement income portfolios to be more complex, time consuming and in need of customization than portfolios for pre-retirement clients.
“While virtually all advisors agree that retirement portfolios must support dual goals of providing consistent income and long-term asset growth, there is little agreement on the best method to achieve these objectives” says Dennis Gallant, President of GDC Research and co-author of the report. “Advisors show significant variation in the philosophies they follow in managing retirement assets, how they diversify assets, and the ways they implement portfolios.”
“The market downturn has been a wake-up call for many advisors who serve retirement clients,” notes Howard Schneider, President of Practical Perspectives, the report’s co-author and a monthly contributor to Research magazine. “Advisors know that among their most important roles is being a trusted guide for clients who are trying to navigate the myriad of questions that emerge in retirement. Making sure a client’s assets are managed appropriately to meet income needs for basic living expenses such as shelter, food, energy and healthcare has never been more of a challenge for advisors.”