Get It In Writing: Retirement Planning For The Wealthy

By Linda Koco InsuranceNewsNet

ARLINGTON, Va. – Most of the 4.8 million pre-retirees and retiree households having financial assets of $1 million or more work with a financial advisor, according to new research from LIMRA Secure Retirement Institute (LIMRA SRI).

But do their advisors always provide them with a formal written retirement plan? Should they?

Those are among questions that Matthew Drinkwater, assistant vice president at LIMRA SRI, will cover during an afternoon session today at the annual Retirement Industry Conference sponsored by LIMRA, LOMA and Society of Actuaries. He discussed a few of the findings with InsuranceNewsNet in advance of the session.

The purpose of the study was to learn how insurance companies can help advisors to continue meeting the needs of their wealthy clients, and, in the process, maintain the clients’ business so they don’t go looking elsewhere for advice.

Retirement planning

The most common area in which affluent clients work with advisors is asset management, Drinkwater said. But there are many areas in asset management, and beyond, where advisors can serve the affluent, the researcher pointed out. One of those areas is retirement planning.

LIMRA SRI found that not all affluent clients have received a formal retirement plan from their advisors, Drinkwater said. Such a plan helps with matching income and assets throughout the retirement years, he noted.

“We asked both advisors and investors if they have formal plan,” he said. The answer was consistent in both groups: Some clients aren’t getting a plan.

Does that make any difference in terms of attracting and holding client assets? “Yes, it does,” he said. The research found that when the advisor did create a plan, the investors reported feeling more prepared for retirement.

In addition, those clients demonstrated more loyalty to the advisor, Drinkwater said. For example, “on average, the affluent who received a plan have 75 percent of their assets under management with the advisor, whereas those without a plan only had 57 percent of their assets under management with their advisor.”

This trend held regardless of whether the investors had assets under management of $1 million to $3.5 million, or $3.5 million and up, he added.

Moreover, the investors who have a plan report having a positive association with having a written plan in place.

Written plans have value even for those don’t think having it is all that important or if they don’t read the plan, he added. “The process of developing the plan can be just as important as having the plan,” he explained.

The value derives from having gone through all the planning steps with the advisor, sharing and reviewing key information, and becoming engaged in thinking through the retirement issues.

Feet to the fire

In general, Drinkwater said, people tend to be very satisfied with their advisor. But affluent investors, he added, will “hold the advisor’s feet to the fire.”

They tend to have high standards and be critical about certain things, he explained. For instance, they want to be able to reach their advisor when needed. This tendency is more pronounced among those with greater affluence than the mass affluent, he added.

Based on that, he said, an advisor who wants to attract and serve this market segment will want to take steps that impact how the affluent perceive their advisor as well as the loyalty they give to the advisor.

“The wealthy can’t do comprehensive planning on their own,” Drinkwater pointed out. So the need is there.

The robo advisor trend is coming along and creating automated asset management, he allowed. But he questioned whether these systems can provide the amount of detail and planning that the wealthy need. Drinkwater suggested that automated systems can provide decision support, but that it will take a human advisor to do the kind of comprehensive planning these investors need.

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes 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].