Although more advisors have come to understand how to manage portfolios in the current environment – in which transparency and an in-depth understanding of investors’ needs have become paramount – a serious blind spot remains when it comes to the distribution phase of their clients’ financial lives.

Across the industry, large numbers of advisors have yet to realize that this new era of heightened client expectations is not only rewriting the rules of asset accumulation and management, but is creating profound changes for the income distribution strategies they recommend for clients’ retirement plans, as well.

The days when advisors could rely on outmoded rules of thumb such as recommending a flat 4% annual drawdown to get each client through retirement are long over. Clients’ needs in the distribution phase are just as varied – and just as important – as those in the accumulation phase.

How can advisors remove the blinders and adapt to increasing client demands and regulatory developments? Here’s a look:

1. Assess where clients stand on the spectrum of retirement income needs. Not every client has the same emotional and financial priorities in retirement. Some have a more acute need for guaranteed income, while others may have a higher risk tolerance. Some attach greater importance to maintaining cash reserves, while others are more focused on leaving a legacy.

Advisors must develop a clear view of each client’s goals and priorities in retirement and adjust their recommendations accordingly. They also should seek to conduct fact-finding conversations using in-depth due diligence tools that can help them understand clients’ motivations and goals during the distribution phase of their lives.

Thorough questionnaires that explore clients’ concerns about income and retirement, with answers that can be scored, may reveal where clients stand emotionally and allow advisors to produce better financial plans.

Advisors also would benefit from learning more about the potential advantages of specific products to address their clients’ varying needs more effectively, including annuities. In some cases, advisors may have unjustified biases against using such products, while others may lean on them too heavily.

Either way, advisors should not let their blind spots or predispositions influence how they create financial plans.

2. Learn newer strategies and how to adapt them to each client’s goals. Advisors today have far more options for retirement income distribution planning than they had in the past – and for tailoring those approaches to suit clients’ needs.

In addition to systematic withdrawal plans, advisors should seek education on more flexible approaches, such as the time-segmented income distribution model and annuity options with guaranteed minimum withdrawal benefits.

Time-segmented income distribution, which aligns different investments with when the client will need withdrawals, is a powerful and underused tool for protecting clients’ lifestyles after they stop working.

With life expectancies on the rise, the average client will need their wealth to last longer than previous generations’. Advisors need to know when, and how, to best make distributions from 401(k)s and IRAs, sell individuals investments and prudently use annuities for each client.

Annuity options with guaranteed minimum withdrawal benefits may be worthwhile for clients concerned about future market volatility. Now that the U.S. economy and stocks have enjoyed nearly a decade of continuous growth, people looking toward retirement have good reason to consider how they could navigate a downturn and still have steady access to funds.

Advisors should seek out resources to discern which annuity options make the most sense for such clients.

3. Stand out with tools to generate customized retirement income distribution plans. Today’s financial planning clients require that advisors replace tools that create cookie-cutter financial plans with solutions that facilitate the development of more customized strategies. By doing so, advisors can better meet the specific needs of their clients and gain a key competitive differentiator in this era of increased client expectations.

By conveying their distribution planning capabilities in their marketing materials and outreach, advisors can position themselves as the go-to experts in their respective locations for clients’ retirement planning needs.

Furthermore, as regulations evolve, it’s more important than ever for advisors to have documented evidence that demonstrates why they made specific decisions to address each client’s unique circumstances.

Expanded Roles

We all know financial advisors’ responsibilities have expanded and grown more complex in recent years. What many have yet to realize, however, is that this new environment will also have profound implications for advisors’ approaches to retirement income distribution planning for their clients.

By better understanding clients’ unique needs in retirement, as well as the options available to address them and the opportunities these new approaches present, advisors can successfully adapt to and capitalize on this new reality.


Zach Parker is Vice President of Wealth Management and Product Strategy for Securities America, an independent advisory and brokerage firm and subsidiary of Ladenburg Thalmann Financial Services Inc.