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Retirement Planning > Spending in Retirement > Income Planning

Cerulli: Advisors Cool Toward Holistic Income Planning

By Staff Writer

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Despite seeing major losses in client portfolios, advisors still have not embraced holistic retirement income planning, says Cerulli Associates.

Only about a third of advisors surveyed say they are more closely analyzing a client’s income needs following the economic crisis, according to researchers at Cerulli, Boston.

But advisors are rethinking their client relationships and their portfolio construction, the researchers say.

A study that Cerulli conducted in partnership with the Investment Management Consultants Association, Greenwood Village, Colo, found that 57% of advisors are expecting to offer more financial planning services, and 51% are planning to recommend more conservative client allocations.

In addition, 44% of the surveyed advisors said they are planning to make greater use of alternative investment products. Meanwhile, only 31% said they plan to make heavier use of guarantees.

Regarding use of alternative investments, Cerulli’s experts say that “tracking success in the institutional marketplace and the need for differentiation are primary drivers behind advisor adoption of alternative products.”

Another factor is today’s tough market environment, the researchers write in the November 2009 issue of The Cerulli–Edge Advisor Edition. Many alternative investment products can offer lower correlation to traditional asset classes, they explain. Also, “nothing else is performing and these (alternative investment) vehicles represent the best opportunity for them to generate revenue in a bear market.”

But the search for performance “has to lead some advisors to allocate these investments less-intelligently to clients’ portfolios,” the researchers warn.

Education, say the researchers, is key to advisor success in this area. That presents opportunities for manufacturers and broker-dealers, who can distinguish themselves by demonstrating to advisors how alternative investments can improve client portfolios, the experts conclude.

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