As clients move towards retirement in massive numbers, advisors have a huge opportunity to help them transition from accumulating assets to generating a stream of income, according to speakers at the 2014 LIMRA Retirement Industry Conference.
“I don’t think there’s a better time to be a trusted advisor,” Tom Burns, chief distribution officer at Allianz Life Insurance Company of North America, who spoke at the conference in Chicago on Thursday. “It’s the perfect time to be a trusted advisor and help those people go into retirement.”
Despite the growing demand for advice on retirement income, however, speakers at the conference said many advisors are neglecting to address this topic with clients. Since most advisors have spent the majority of their careers helping clients save for retirement, they are most comfortable talking to clients about savings and investment products rather than income products.
“So many people are focused on the accumulation stage, and obviously saving and growing your money is extremely important,” said Shaun Eck, assistant vice president at Fifth Third Securities. “But who is talking about the distribution stage?”
By failing to address this topic, however, advisors risk losing clients to other advisors. Eck pointed to statistics showing that the average investor has three advisors during the accumulation stage, and only one by the time they start drawing on their savings in retirement.
“If we’re not having that distribution conversation, what’s going to happen?” he said. “We’re going to be that guy who’s left behind.”
Advisors who have spent years helping clients save for retirement are well positioned to carry that relationship into the next phase of their clients’ lives, said Ed McGill, wealth management advisor with Northwestern Mutual Financial Network.
“If that person had a good relationship [with us] during the accumulation phase,” he said, “we’re positioning ourselves as the group they’re going use during the distribution phase.”
Planning for retirement income can be a complex undertaking, with most clients having to factor in a variety of different sources of income, such as workplace pensions, RRIFs, Canada Pension Plan and Old Age Security, as well as the tax implications of each one. Beyond these income sources, clients have access to a growing range of products and investment vehicles that are designed to convert any additional retirement savings that they have into a stream of income, such as various types of annuities and segregated funds.
Investors are “bewildered with the choices before them,” said James McCool, executive vice president of client solutions at Charles Schwab & Co., Inc.
Advisors can play a critical role in helping clients understand which solutions are most appropriate for them, the speakers said.
“You need to be able to help your clients understand what is the proper mix of assets,” said McGill.
The speakers acknowledged that it can be challenging even for advisors to keep track of the growing array of retirement income products. However, as financial industry firms recognize the significant opportunity to tap into the retirement income market, Burns said they are increasingly focused on developing tools and educational resources to help advisors address this important topic with their clients.
More information: Investment Executive, A fine balance: A three-part series on wealth de-accumulation strategies