Post the economic downturn, one thing is certain: the need for retirement income planning is more important than ever, but building retirement income portfolios for clients remains one of advisors’ biggest challenges.

A recently released report by independent consulting firms GDC Research and Practical Perspectives titled “Update: Advisor Best Practices in Retirement Income,” finds that although advisors are far more confident than they were six months ago about their ability to help clients effectively manage retirement, there remains a “high degree of skepticism” among advisors regarding fundamental aspects of managing retirement income portfolios. “Advisors are hungry for understanding what their peers are doing in this retirement income space,” says Howard Schneider, president of Practical Perspectives, who conducted the study along with Dennis Gallant, president of GDC Research. “It’s not like accumulation where advisors all follow the same conceptual approach. Advisors aren’t 100% sure what the right way to do [retirement income planning] is; they are looking for studies to show them because the risks are high for the client.”

Indeed, Gallant notes there “remains little agreement on the best method to deliver retirement income” among advisors. “Advisors want clearer benchmarks on best practices and greater understanding of how their peers deliver retirement income support. They also want help with keeping up with many of the new solutions available in the marketplace.”

Gallant and Schneider’s online study of 100 advisors of all stripes conducted in October 2009 found that 4 in 10 (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.


The Financial Planning Association’s annual retirement survey, “2009 Financial Adviser Attitudes and Perceptions About the Retirement Income Distribution Market” released in mid-December, also found that advisors are spending the bulk of their time addressing clients’ retirement income needs.

The FPA research, conducted by Diversified Services Group and sponsored by Nationwide Financial Institute of Retirement Income, found that 50% of planners’ retirement planning time is focused on retirement-income-related activities, “such as calculating a client’s income needs, determining the appropriate asset allocation mix, developing a withdrawal strategy, and selecting and processing optimum investment products and solutions.”

Schneider and Gallant found in their research that because of changing market conditions, many advisors “have gravitated to an income floor methodology for building portfolios, leveraging some of the benefits of the previously identified total return and pooled methodologies.” What’s more, the two researchers say that there is still a “high degree of skepticism among advisors” regarding fundamental aspects of managing retirement income portfolios, with less than half of the advisors agreeing that Modern Portfolio Theory (44%) and historical performance assumptions (45%) remain valid.

The FPA research also says that advisors are using more “personalized approaches” to retirement income needs, and are ditching a systematic withdrawal approach.

Despite the market downturn, Gallant and Schneider’s research says that 61% of advisors have grown their retirement income business over the past year. Gallant cautions, however, that while there is “a lot of opportunity” for advisors to secure new clients, advisors must choose carefully which clients to take on. “You have clients who have devastated portfolios and they have unrealistic expectations of the advisors, so advisors have to make sure they can add value for these clients.”

Washington Bureau Chief Melanie Waddell can be reached at