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Retirement Planning > Retirement Investing

How to be a retirement planner

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Retirement planning has been shaping up to be one of the more interesting specialty areas in the financial services business, especially as boomers have started to hit their retirement years. Now, compound the sheer number of people needing assistance with the variety of financial challenges facing them, and you have one of the most dynamic markets a good producer could hope for. Without a doubt, this is one of the areas where people are desperate for solid financial guidance and advice.

The three participants in this month’s roundtable have deep experience in offering such guidance, and they’re here to share their advice.

For part two of this roundtable, see: Annuities and Social Security: What retirees need to know

Q. How did you come to focus so much of your business on the retirement planning area, and what advice would you give to an agent who is looking to expand his or her market to include retirement planning as a specialty?

Paul S. Carpenter, CPA, CFP. Carpenter Financial Services: I am focusing more attention on the retirement market simply because of the increased demand from my generation, who are the baby boomers. Retirement has come front and center, and there is new urgency to plan. Retirement planning has been a focus of my practice since the start. Most boomers up to now have been in the accumulation stage of retirement planning, and they are starting to realize that the distribution phase is critical. I explain it to my clients this way: “Your growing phase is ending, and you are now embarking on your spending phase.” The spending phase is where we are subject to the most risk because too many variables are unknown.

The advice I would give to an agent trying to expand into retirement planning is to make sure you have the education and expertise to give advice that will stand the test of time. This is not an area for the untrained; it is a specialty. It is critical to have a good solid understanding of tax law as well as expertise in wealth management. Poor tax execution can surely sink a plan, so it is important for the plan to cover the net, not just the gross, income needed.

Curtis V. Cloke, CLTC, LUTCF, financial advisor and retirement income expert, trainer and speaker: In my early days as an advisor, I mostly helped my clients achieve goals restricted to their accumulation years. This included providing them with a lot of life insurance to help them protect their families and businesses, as well as helping them plan to cover their kids’ education expenses. I also did a fair amount of estate planning. I came to focus more on retirement planning as it gradually became more important to my clients.

I found that, by listening carefully to their goals and expectations for retirement, I could begin to craft the plan that was right for them. Where my expertise came into play was in identifying and verbalizing the risks that posed the greatest threats to their retirement. Only then was it appropriate to begin a discussion about the financial strategies and products that would best suit them.

That is my biggest piece of advice to agents interested in expanding into the retirement planning specialty: learn to listen. I believe 75 percent of success in this industry is based on your ability to connect emotionally with a client. Only 25 percent is the technical persuasiveness of your financial strategies. If you can listen to your clients and help them understand what it is they are most worried about in their retirement and how best to protect them from those risks, you can be successful in this business.

Randy L. Scritchfield, CFP, LUTCF, president of Montgomery Financial Group in Damascus, Md.: Specializing in retirement planning occurred primarily and most naturally as a function of my existing market. Being a baby boomer myself, as my clients aged, their needs changed, and I changed with them. For many clients, early in our relationship, I attended their weddings, sent them baby gifts, and shortly thereafter, established college funding accounts. Their children have now graduated from college, and I am helping them decide where and how to retire.

My advice to a new agent looking to specialize in this would be to truly do so — specialize. One should not have a list of specialties, but rather just one. In a survey of Top of the Table members as to how they made Top of the Table, one of the primary reasons stated is to specialize.

For my clients who are both preparing for and in retirement, I am a resource for many products and services but not necessarily delivering them myself. For example, I work with a long-term care specialist who handles that for my clients, given that it is such a specialty unto itself.

Q. Are your clients and prospects truly aware of how much money they realistically will need for a secure retirement? And if not, what techniques do you use to motivate them to plan appropriately?

Carpenter: We look at a plan knowing there is no such thing as 100 percent accuracy. Life is complicated and expenses come from deep left field sometimes, so we work with clients to prepare accurate post retirement budgets for both necessities and luxuries. We try and nail down accurate plans to take care of the necessities while using excess funds to cover the luxuries. We also try to create what-if scenarios with funds set aside for liquidity needs, as well as covering future inflation risks. As for motivation, poverty is a great motivator, so clients generally understand they must keep spending within limits or risk the consequences.

See also: 4 retirement income risks — and how to avoid them

Cloke: The average person I advise is not well educated on the amount of resources it will take to provide the desired level of income relative to their desired level of risk. This can, at times, lead to a bit of sticker shock. Once again, education and honesty are the keys to moving beyond those moments.

I use a baseline approach to help illustrate the person’s present situation compared to the solution scenario, which is net of all the effects of strategies I employ. I make sure to highlight benefits they are receiving, such as security of income, maximum return on investments and achievement of legacy goals. My clients are reasonable people. Once confronted with results of a well-executed analysis, they adjust their expectations accordingly.

Scritchfield: I practice what I refer to as means-oriented planning rather than target-oriented. Funding for a certain targeted income — using earnings and inflation assumptions — can be both challenging and psychologically defeating. Instead, I help clients focus on what they can save for retirement by first funding their retirement plans as much as they can, then investing it properly, and finally and most importantly, protecting it — through living benefits and other means.

Q. As you look at the retirement planning market, what particular issues stand out as your biggest concerns? On the flip side, in what areas are you optimistic about the market and your role within it?

Cloke: The biggest issue is people living longer than ever. This has given rise to what is today a retiree’s worst enemy: longevity risk. Most people are familiar with some of the effects of longevity, such as outliving their assets. What they fail to understand is how longevity is also a multiplier of other risks.

The longer someone lives, the more likely they are to be adversely affected by other financial risks. For example, if someone retired in 2004 and died in 2007, market risk would not have been an issue for them. Had they lived a couple of years past then, it likely would have been a major concern. The analogy can be extended to inflation, reinvestment, sequence of returns, and other important risks facing those planning for retirement.

See also: Living with longevity

This issue is a double-sided coin, however, because those of us in the insurance industry are perfectly poised to combat financial downsides of longevity. Think of all the tools at our disposal that can protect people. Annuities can shelter income from fluctuations in the market and can guarantee someone a paycheck for the rest of their life. Long-term care insurance can assure people that even the most debilitating illnesses or disabilities will not remove them from the comfort of their home, or have their spouses left in near poverty after they pass away.

With these fundamental worries erased, people are free to invest money in the market more aggressively. Then they can reap the rewards of market fluctuations without living in fear of its concomitant potential for destruction.

Insurance is based on the wisdom that an ounce of prevention is worth a pound of cure. With the risks to retirees so numerous and the possibilities of financial ruin so real, the premiums are worth the cost today. Most retirees see that logic, and therefore, potential for our industry is unlimited.

Scritchfield: Starting with the optimistic, I am confident that the retirement advisor will be needed more than ever in the next 20 years because of the combined impact of demographics and ever-changing products. Twenty years ago, we never imagined some of the innovative retirement planning products that became rather commonplace. We may have said early in our careers, “A lifetime income without annuitization? How would that work?” But such products now play a very important role in the marketplace.

Just as new pharmaceuticals have not replaced a competent physician, so will the advisor be more needed than ever in our ever-changing world of products. The professional advisor will continue to be needed to diagnose the challenges, prescribe the proper remedies, and counsel throughout the ongoing treatment plan. The client’s challenge of making sure their retirement account does not die before they do will always exist, even though the products we use to help them manage that risk may change.

Carpenter: My biggest concern is that a lot of people are too far behind in their savings to ever consider a traditional retirement and will need to continue to work part-time through their golden years. This is because a majority of boomers have spent a lot of energy chasing fads with their 401(k)s and retirement savings and got frustrated in the 2000s.

Another concern is that taxes and inflation will erode people’s standard of living in the future. I hope government regulation and spending will not create its own tax and runaway inflationary pressure and government gridlock will one day subside. I also hope we will find a permanent solution to funding Social Security that will not cheat the current or future generations out of their promised benefits or penalize savers.

I am optimistic about boomers who managed to navigate the turmoil and are in the homestretch of retirement planning, seeking advice from professionals. Some are seeking advice for the first time in their lives as they wrestle with the gravity of the situation. These boomers will find competent professionals who are trained for the mission at hand as the turbulent decade also serves to cleanse the profession of marginal advisors. I think the surviving advisors will provide high-quality advice.

For more on retirement planning, see:

Study flags retirement concerns among America’s youth

How to target today’s senior market

Is it time for retirement to retire?


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