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Advisors More Confident on Retirement Income, but Faith Falters in MPT

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Advisors of all stripes are much more confident now than they were even six months ago that they can meet the retirement income needs of their clients, but there remains no agreement on the best way to provide that income, and a majority believe that building retirement income portfolios is a greater challenge than ever. Moreover, a large minority of advisors no longer believe that Modern Portfolio Theory (44%) and historical performance assumptions (45%) remain valid approaches to building those portfolios. Those are some of the major findings in a new study conducted by the independent consulting firms GDC Research and Practical Perspectives on how advisors are feeling about, and actually providing, income to their retired clients. The authors of the 54-page report, “Update: Advisor Best Practices in Retirement Income,” Howard Schneider of Practical Perspectives and Dennis Gallant of GDC Research, conducted online surveys in October 2009 of more than 100 RIAs, independent B/D reps, and brokers from regional and wirehouse firms.

The study found that 40% of those surveyed said they were “far more confident” than they were a year ago in their ability to serve the retirement income needs of clients, and that confidence level was nearly double the level the researchers found in March 2009.

In a prepared statement, Gallant noted that despite the increased confidence levels, “there remains little agreement on the best method to deliver retirement income” and that advisors wanted “clearer benchmarks on best practices and greater understanding of how their peers deliver retirement income support.”

Schneider said that many advisors are “following a newly identified income floor approach which has emerged in response to changing market conditions.”

As for the actual vehicles being used, advisors reported they are increasingly using ETFs and annuities and are relying less on target date funds, and that they expect to rely more on ETFs in the future and less on passively managed mutual funds.


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