Retirement Income Planning Becoming More Important to Advisors

WINDSOR, Conn., Apr. 26, 2012 — According to a new LIMRA survey, three quarters of advisors who offer retirement income services to their clients said they had adjusted their business to do more retirement income planning over the past year. (chart)

“With 10,000 Boomers turning 65 each day for the next 18 years, advisors are recognizing the substantial market for retirement income planning,” said Matt Drinkwater, associate managing director, LIMRA Retirement Research. “Outside of the pure demographics, LIMRA’s research has found that only one-third of Americans feel they are saving enough for retirement and a majority of pre-retirees (people within 5 years of retirement) feel that they are not prepared for retirement. There is a great opportunity to help these consumers identify their financial needs in retirement and develop a sound plan to address them.”

LIMRA’s study, “Advisor Perspectives on Retirement Planning,” found that for 4 in 10 advisors, retirement planning constitutes half or more of their business activities. More seasoned advisors tended to advise more clients regarding retirement planning.

Similar to prior LIMRA research, six out of ten advisors deem longevity to be the greatest risk facing their clients. More than half of advisors listed paying for long term care costs as a top concern.

While there was no consensus on the retirement income strategy that will be used most often in two years, advisors often favor systematic withdrawal plans or a "buckets" approach* due to their flexibility, control and retention of assets. In contrast, strategies in which guaranteed income sources are used to cover non-discretionary expenses (like housing, food and health care), and non-guaranteed sources are used to cover discretionary expenses (like entertainment and travel) were less often expected to increase in popularity. These findings suggest that manufacturers of guaranteed income solutions must demonstrate how their products fit into other retirement income strategies in order to broaden their appeal.

Formal written retirement plans play a critical role in most advisors’ practices. Six in 10 advisors say that formal written plans are well received by their clients. Earlier LIMRA research reveals that only three in 10 pre-retirees who have worked with an advisor have a written retirement plan.

For the advisor, the formal written plan offers a variety of benefits to their clients as well as their overall business. Overall, advisors agree that written plans offer:

An easy way to discuss product solutions (83%)
Better understanding of their clients goals (82%)
Higher client retention (81%)
The ability to obtain more rollover assets (72%)
The ability to attract more referral business (71%)

“As retirement income planning continues to increase in prominence among advisors, they and their firms are seeking ways to position themselves to offer more of these services,” said Drinkwater. “Advisors need to address the expanding scope of retirement planning that their clients might need, and assess the capabilities and expertise required to meet the growing demand for these services.”

About the Survey

The findings are based on an online survey of 1,042 financial advisors (registered investment advisors, registered representatives of broker-dealers, dually-registered representatives, bank professionals, and other advisors) who had been in their field for more than one year, and spent at least 10 percent of their business activities providing financial planning for retirees or pre-retirees. Institutional investors and life insurance agents who receive at least 85 percent of their product sales through one company were excluded. The survey was fielded in December 2011.

* “Buckets” approach involves a plan in which short-term/fixed-return investments are used to generate current income; intermediate-term investments are gradually converted into short-term; and long-term investments are gradually converted into intermediate-term investments.

LIMRA Contact:

Catherine Theroux, 860-285-7787, ctheroux@limra.com.

About LIMRA

LIMRA, a worldwide research, consulting and professional development organization, is the trusted source of industry knowledge, helping more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.