Study: Advisors Need More Retirement Planning Tools

There is no single, holistic tool or capability that financial advisors are using to deliver retirement income, according to the authors of a new study.

In other words, a formalized approach to retirement planning is lacking.

“There’s weak to moderate satisfaction with the tools that are out there,” said Dennis Gallant, president of GDC Research in Sherborn, Mass. “Financial planning tools like eMoney add value, especially as the overall market shifts toward advice post-DOL, but advisors need more support in adopting a planning-oriented practice.”

An 85-page report called “Advisors and Retirement Income Support – 2016” builds on prior research dating to 2008 and examines how advisors work directly with individual retirement income clients.

“There has been virtually no shift in the philosophies advisors use to manage portfolios or greater agreement on the best solutions to use for these investors since our last study in 2008,” said Howard Schneider, president of Practical Perspectives, which provides consulting and research services.

Advisors are using multiple planning tools, optimization calculators, Monte Carlo simulations and Excel spreadsheets to deliver retirement income support for clients.

“It’s an unbundled approach that varies from client to client,” Gallant told Advisor News. “Advisors need more technology that will allow them to scale support because retirement income planning requires more time than accumulation.”

A GoBankingRates survey from earlier this year found that one in three Americans has $0 saved for retirement. Obama administration officials and legislators are working on various proposals to address the issue.

Advisors Play a Big Role

Specifically, advisors are asking for a tool analysis solutions across the client’s entire retirement income portfolio.

“Advisors need more help bringing information together to present to their clients,” Schneider said. “They are looking for a more consultative approach.”

Retirement income support includes managed accounts, portfolio management and planning software. However, the process has become increasingly challenged by low interest rates and other factors, Schneider said.

“The environment in which advisors are trying to deliver retirement planning advice is being rendered more difficult by the changing regulatory environment, the looming DOL, inflation and market volatility,” he added.

Making matters worse is the fact that retirement planners within the profession are a minority. Only one in seven advisors position themselves to serve retirement clients, according to the report.

“While support for retirement income clients is a core activity of virtually all advisors, few specialize exclusively on the topic and many still do not have a significant focus on offering help with less traditional subjects such as Social Security, healthcare, or cognitive aging issues,” Gallant said.

Instead, most take a more generalist approach in the advisory retirement services they offer.

“The more advisors can formalize their approach, the better, but standardizing retirement income support is difficult to formalize because each client's needs are so diverse and their circumstances are unique so it becomes a challenge to plug someone into a cookie cutter approach,” Schneider said.

Juliette Fairley is a business and finance journalist who has written four personal finance books for John Wiley & Sons and has written for major news organizations, such as The New York Times and The Wall Street Journal. She is a member of the American Society of Journalists and the New York Financial Writers Association and a graduate of Columbia University's Graduate School of Journalism. Juliette can be reached at [email protected].

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