How important is retirement income planning to your business?
If you’re anything like the advisors surveyed in our just-released Financial Professional Outlook, retirement income planning plays an important role in your practice. And it’s likely to increase in the coming years.
The reason is that 10,000 Americans are reaching retirement age every day1. And now that Baby Boomers have begun turning 65, retirement income is becoming one of the most important topics in the investment industry. This represents a significant opportunity for advisors, but there are some real challenges, as well. But we’ll examine the opportunities first.
For most advisors, retirement income planning is a big deal
Nearly three out of four advisors (72%) say that retirement income planning is a big part (51%) or the core (21%) of what they do. An additional 23% say that retirement income planning is a small but regular part of their business.
The importance of retirement income planning as part of the advisors’ practice
As waves of Boomers approach retirement age, these numbers will only increase. Of course, this is good news for advisors because many of those investors in or nearing retirement will be seeking advice on how to achieve a sustainable stream of retirement income. But that’s also one of the major challenges.
Advisors are trying to do the right things
In the latest survey, more than 98% of respondents said they’re doing what they can to educate themselves on retirement income planning. Yet facing a low-return environment and with interest rates at historic lows, there is no consensus around the right resources to consult. Our survey also highlights a high degree of investor uncertainty about the capital markets over the next three years. What’s more, according to advisors, running out of money in retirement continues to be seen as an important topic for both advisors (38%) and investors (34%).
Our findings are supported by recent research from the Wells Fargo-Gallup Investor and Retirement Optimism Index survey. It noted investor concerns about rising healthcare costs, low interest rates and a fear of outliving their money in retirement2.
How advisors educate themselves about retirement income planning
As the chart shows, advisors are searching far and wide for answers about how to produce and plan for retirement income. The survey offered a range of responses and advisors could choose any that applied to them. Top responses ranged from material they found online or in books (68%) and industry peers (52%) to fund companies (49%) and accredited courses (45%), among others. They also had the opportunity to write-in other resources they use.
Given the risks and uncertainties investors in or near retirement face today, we believe advisors need to keep their options open. That means having a strategy that can adapt to a changing investment environment. It also means having a plan that the investor can understand and revisit regularly — all while keeping focused on the client’s assets, liabilities and goals.
2 Low-interest-rates-crimp-retirement-plans-survey-finds, New York Times, 06/07/12