Advisors are worried that their clients aren’t looking at retirement realistically. Russell Investments’ quarterly Financial Professional Outlook survey, released Wednesday, found advisors think 54% of their clients have unrealistic expectations about retirement income.
Another survey, from TD Ameritrade, found that half of Americans are not looking forward to retirement.
Retirement income is a common topic between advisors and clients. Thirty-eight percent of advisors said they initiated a conversation about their clients running out of money, and 34% of said their clients brought it up.
For most advisors, their clients’ unrealistic expectations are the result of incorrectly estimating how much they’ll need in retirement (61%), but over half said information from unprofessional sources like friends and family, and the Internet, were also part of the problem. Half said their clients just didn’t understand how their current spending and saving patterns could affect their retirement.
While 72% of advisors surveyed said retirement income planning is a core part of their practice and 98% are dedicated to becoming experts, they have different strategies for building their expertise. More than two-thirds are using books and online resources, while just 45% are taking accredited courses on the subject. Over half turn to their industry peers for help and 49% are talking to fund companies.
“Most advisors are trying to tackle the retirement income challenge, but many feel the investment industry has not provided the right tools to set a standard for how this should be done,” Phill Rogerson, managing director of consulting and product development for Russell’s U.S. advisor-sold business, said in a statement. “Investing to produce sustainable retirement income and maintain some level of flexibility is a very different challenge than investing and saving for retirement—and advisors are clearly struggling to find the best way to do this.”
The most common strategies for answering the retirement income question were a diversified portfolio of mutual funds. Three-quarters of advisors said they frequently or always recommend that strategy. Sixty-four percent recommend dividend-paying equity funds and 51% recommend bond funds.
Russell conducted its survey between April 24 and May 11 among 353 advisors at 122 firms. Advisors were not required to have a relationship with Russell to participate.