Defined contribution plans such as 401(k)s have so changed the retirement landscape that advisors are firmly planted in a new financial-planning era that requires them now more than ever to help clients with rollovers, annuities and income in a low-yield environment, a new Cerulli Associates report says.

“Advisors are grappling with how to construct retirement-income strategies that are personalized, dynamic, flexible and tailored to retirees’ individual needs,” writes Cerulli analyst Joy Greenberg in a data-filled research report published Wednesday in the Investment Management Consultants Association’s (IMCA) Research Quarterly.

Cerulli’s research points to retirement market trends that advisors face, including low interest rates, that have called into question the common method of overweighting traditional fixed income securities as a way to generate retirement income.

At the same time, Cerulli says, strong equity markets have led to more risk-taking even as retirees are confronting greater longevity risk, long-term care costs and health care expenses.

Cerulli estimates that roughly 73% of rollover assets go to providers with whom investors have current relationships.

Considering that rollovers to an advisor account for 54% of overall rollovers, advisors who maintain strong relationships with their clients have an advantage, Cerulli says, especially considering that rollers to advisors were on average more than twice the size of rollovers to direct providers, at $120,000, compared with less than $60,000 for direct providers.

DC Replacing DB

All these issues are now cropping up at a greater rate for advisors because many traditional defined benefit (DB) plans, such as company pensions, are going away and being replaced by defined contribution (DC) plans, according to Brian Ullsperger, a certified investment management analyst at Andersen Tax’s investment advisory services in Washington.

“The time of DB plans is ending. We’re entering into an era over the next five to 10 years where we’ll have more clients with DC plans than DB plans,” Ullsperger said in a phone interview.

But that reality has added a new challenge for advisors, he added.

“Whenever we come across clients with DB plans, they’re in a far better position in retirement because they already have a lifetime annuity,” Ulsperger said. “With clients with DC plans, you’re trying to help them build their own DB plan.” Sequence of Returns

John Nersesian, IMCA’s chairman of the board and a managing director with Nuveen Investments, said advisors are increasingly taking on the task of managing the sequence of returns so clients don’t outlive their retirement savings.

“If I retire and have $1 million in various investment accounts, the return may be 8%, but how do I get that return? What if my portfolio is down 30%? That’s the unknown for clients,” Nersesian said.

Advisors should be aware that with retirement income, average rate of return matters less than how return is earned, Nersesian said. The key is to focus on the sequence and consistency of returns, he said.

“If you compare two investors, the one with gains at the start and losses at the end will make it all the way through at 10% in retirement. The other investor, who starts with a loss but ends with a gain, has earnings in a different sequence, and has to withdraw principal from his retirement portfolio,” Nersersian noted.

Cerulli’s research finds that dividend-paying stocks and equity mutual funds are the most commonly used retirement income strategies in 2015, with 47% and 38% of IMCA advisors reporting they use these strategies frequently.

The greatest obstacle for advisors to offering retirement income and planning services is that it is a very time-consuming process, Cerulli found in its survey of IMCA advisors. They also cited lack of consumer awareness, client resistance due to unclear benefits and costs, product complexity and a lack of technology.

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