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Retirement Planning > Retirement Investing

Advisors find retirement income planning a challenge

By Warren S. Hersch

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Four in 10 financial advisors say having retirement income discussions with clients is very or somewhat challenging, according to a speaker at the Insured Retirement Institute’s IRI Marketing Forum, held in New York City on Thursday.

Howard Schneider, president of Practical Perspectives, delivered that message as moderator of an afternoon workshop, “Strategies for Advisor Engagement. Participating on the panel were Rodney Allain, a senior vice president and national Sales director of Prudential Financial; James Brown, executive vice president of Advisor Group; and Craig Lombardi, managing director and head of sub-advisory and defined contribution sales for AllianceBernstein.

Schneider said that most advisors his company has surveyed since 2008 have a “significant” and “growing” number of baby boomer clients who require retirement income planning. The percentage of clients in this planning phase, he says, generally varies between 10 and 80 percent of the advisor’s customer base.

“The boomer market is not yet a Tsunami, but advisors definitely are seeing a steady growth in terms of the number of retirement income clients they serve,” he said. “Most advisors tell us the retirement income market is ‘very important’ to their practices.

But Schneider observed that advisors are finding that delivering retirement income planning solutions to their clients is becoming more challenging. Among the reasons he cited are the uncertain market outlook; and the difficultly of crafting a customized income distribution plan based on the client’s retirement objectives.

The difficulty often stems, too, from having to communicate “bad news” that clients don’t want to hear. Prime example: Indicating that clients will have to plan for a smaller than expected monthly income because they didn’t save enough while working or because their investments have not performed as well as expected.

To help advisors better prepare planning engagements with retiring boomers, Brown said that Advisor Group regularly hosts webinars and in-person training sessions. The instruction is supplemented by educational resources provided by company’s manufacturer partners.

Lombardi observed that such education could prove critical to retaining longstanding clients who are transitioning from wealth accumulation to income distribution. He noted that advisors on “countless occasions” divulged to him that they lost a profitable client because they were unable to provide retirement income expertise.

A common theme expressed by the panelists, when asked how they introduce new retirement income ideas to advisors, was the need to team with distribution partners. Lombardi noted, for instance, that AllianceBernstein jointly hosts educational meetings at branch offices with representatives of both partnering wholesalers and insurance carriers. The company also has co-created with it distribution partners online training models that advisors can listen on their own time. Upshot?

“We’re seeing about a 40 percent uptick in our business, thanks to our shared engagement model,” he said. “We feel that advisors have a better engagement with us as a result than when we try to deliver education and training on our own.”

Brown added that it’s “no longer acceptable” for wholesalers to focus solely on product training at educational gatherings. To be of value to advisors, the training has to focus as much on navigating complex topics that are likely arise in client engagements, such as Social Security, Medicare and long-term care, then leveraging expertise in these areas when developing a retirement income plan. “Roughly 80 percent of our education content now is focused on helping advisors identify planning solutions, as compared to 20 percent that’s focused on product training,” said Brown. “Seven years ago, these ratios were reversed.”

Lombardi echoed Brown’s points, observing that Social Security, healthcare, long-term care, as well as outliving one’s income, are repeatedly listed as the top concerns of clients in surveys that AllianceBernstein conducts.

How, asked Schneider in closing, can providers best tailor their educational outreach efforts when advisors use so many approaches to retirement income planning?

“We’re careful to point out that a variable annuity could take pressure of other unprotected portfolios, given the level of income certainty,” said Allain. “But it’s really up to the advisor to make the decision as to where a VA is appropriate.”

Added Brown: We try to understand the distributor models they’re comfortable with. And we try to adapt our messaging to whatever solutions the advisor has in mind.”

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