April 17, 2013 INN Exclusives

Advisors Step Up To The Retirement Planning Plate

By Linda Koco InsuranceNewsNet

NEW ORLEANS – If there is any doubt that financial advisors are stepping up their efforts to offer retirement income planning and services, LIMRA has some numbers that should put that doubt to rest.

Among the more than 1,000 advisors the firm surveyed in late 2011, nearly all (89 percent) said they do offer retirement income planning services to clients. In addition, three-fourths (76 percent) of those advisors said they made changes in the last 12 months so as to do more retirement income planning than previously.

That is according to data that will be presented here this afternoon at an early-bird session of this year’s Retirement Industry Conference. The meeting is sponsored by LIMRA, LOMA and Society of Actuaries (SOA).

In the session, Matthew Drinkwater, associate managing director-retirement research at LIMRA, and Andrew Peterson, senior fellow-retirement systems at SOA, will provide current research results on how advisors and consumers are thinking about and approaching retirement.

Surprising data

The findings about changing advisor activities are among some of the surprising data that appear in a presentation the speakers made available in advance of their talk.

The percentages are surprising because many industry watchers have said, publicly and privately, that advisors really aren’t giving retirement income planning much attention. The common buzz is that advisors are still focusing mostly on helping people accumulate money for retirement rather than helping people manage and spend during retirement.

It could be that the LIMRA data is signaling change is in the air, at least among certain types of advisors.

The financial advisors surveyed by LIMRA were registered investment advisers (RIAs), registered representatives of broker-dealers (B-Ds), dually registered reps, and bank professionals. These advisors have been in their field for more than one year and they report that at least 10 percent of their business activities come from providing financial planning for retirees or pre-retirees.

Excluded from the survey were institutional investors and life insurance agents who are receiving at least 85 percent of their product sales through one company.

Based on that, it seems that advisors who say they are stepping up the retirement income side of their practice tend to be working in financial fields allied with the life insurance business but not limited to life insurance.

How have the surveyed advisors changed their practices to adjust for income planning? Nearly half (44 percent) say they have introduced new products or services, according to the LIMRA findings.

In addition, 37 percent said they added more components to their financial planning or advice-giving capabilities.

Others said they obtained special training, extended their network of relationships with lawyers or other professionals, and even added professional staff. Still others changed their platform or practice model and/or launched new website or major addition to their web pages.

Growing certainty about consumer need

Taking those steps might seem like a big investment to make, if advisors feel uncertain about whether clients will want, and pay for, the retirement income planning products and services.

But maybe the surveyed advisors no longer feel uncertain about that, if they ever did feel such uncertainty.

After all, consumers who work with advisors tend to be “older and have higher investable assets,” according to other LIMRA data the speakers will present.

Specifically, 26 percent of consumers who work with a financial professional gave their age as 70 or older, compared to just 17 percent of consumers who do not work with a financial professional. In the age 60 to 69 category, 41 percent of the consumers said they work with a financial professional while only 38 percent said they do not.

As for household wealth, 17 percent of those who work with a financial professional told the LIMRA researchers that they have $1 million or more in household investable assets, whereas just 9 percent of those without a financial professional said their households have that much in investable assets.

Here’s the clincher: Three-fourths of the surveyed consumers said they have worked with an advisor on retirement planner to a “moderate” or “considerable” extent.

Putting it together, it seems that advisors who have older and wealthier clients are doing retirement income planning with those clients.

Retirement concerns increasing

Data from SOA reveals a number of concerns that may be spurring consumers do retirement planning. For instance, SOA found increased retiree concerns about not having enough money to pay for adequate health care in retirement, or for long-term care.

In 2011, for instance, 61 percent of retirees told SOA researchers that they were concerned about paying for adequate health care, up 41 percent in 2003. Also in 2011, 60 percent voiced concern about being able to pay for long-term care versus 47 percent in 2003.

The SOA researchers also found that retiree concerns have been rising about inflation, maintaining standard of living and depleting savings in retirement.

Increased concern shows up among pre-retirees, too, with the only difference being that pre-retirees generally have expressed slightly more concern in each category over the last decade than those who already are retired.

Despite all that, the SOA data show a somewhat puzzling response to the concerns: Only a relatively small percentage of the overall population has decided to manage risk with guaranteed income products and options.

For instance, just 39 percent of retirees and 40 percent of pre-retirees told the SOA researchers that they have bought, or plan to buy an annuity or chosen an annuity option from an employer plan.

By comparison, a much larger percentage of Americans seem to think they can manage these concerns the home-grown way.

For instance, 83 percent of retirees and 90 percent of pre-retirees said they already have, or plan to, manage their retirement risks by eliminating all their consumer debt, according to the SOA data. In addition, 81 percent and 89 percent, respectively, said they have already, or are planning to, try to save as much as they can.

No doubt, retirement income professionals are running into those trends in their everyday work with retirement clients. What is interesting is that the financial advisors whom LIMRA polled appear to be moving forward into the retirement income market all the same.

The LIMRA/SOA presentation starts at 4 p.m. today.

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].