A new trend is emerging in the retirement planning space, Francois Gadenne, executive director of the Retirement Income Industry Association, wrote for Advisor Perspectives, an interactive publisher serving the financial industry, on Aug. 9. Clients once sought likely expectations of returns on their financial assets, but now look for reasonable certainties of payments from those assets, Gadenne said.
“Success in this environment will accrue to those advisors who act as true retirement professionals rather than to those who take a technician-oriented approach,” Gadenne, (left), wrote, urging advisors to build upon modern portfolio theory rather than be limited by it.
“The larger range and greater complexity of retirement advisory tasks, when compared to investment advisory tasks, is driving the emergence of a retirement management profession,” he said.
Gadenne describes three categories of firms based on a theoretical framework proposed by David Maister in the mid-1980s, then an assistant professor of business administration at the Harvard Business School.
Maister broke the service industry into three categories to differentiate between professionals and technicians. Gadenne adapts those categories for the financial services industry:
- Brains: Advisors who perform client tasks that are at the creative edge of their practices and deal with unique projects that require fundamentally different customizations from client to client. Firms in this group have a narrow organizational structure with a few employees supporting top-level advisors.
- Gray Hair: Advisors who deal with issues that are similar to what they have seen before and consciously work to leverage and to scale up their past experiences. These firms have many entry-level employees supporting a few top-level workers.
- Procedural: Advisors with well-defined and well-specified client tasks who seek to deliver services in the most timely and cost-efficient manners. Procedural types of firms have several tiers of employees.