Retirement income planning a top priority for financial advisors

Most financial advisors want to help their clients generate reliable income after retirement, but product options and clients’ unrealistic expectations keep them from being successful, according to a new survey of U.S. advisors by Russell Investments.

Seventy-two percent of the advisors surveyed for the Financial Professional Outlook (FPO) said that retirement income planning is either a large or core part of their practice, and another 23 percent said it was a small, but regular, component of their business.

 More than 98 percent of survey respondents said they are trying to learn more about retirement income planning and strategies to build expertise in retirement income planning. They also indicated that there was no consensus on the right resources to consult, but 68 percent said they read books and online material; 52 percent consulted with industry peers; 49 percent went to fund companies; and 45 percent took accredited courses.

"With 10,000 Americans reaching retirement age every day, a growing number of investors are turning to their financial advisors for help in determining if, when and how they'll be able to retire," said Phill Rogerson, managing director of Consulting and Product Development for Russell's U.S. advisor-sold business. "Most advisors are trying to tackle the retirement income challenge, but many feel the investment industry has not provided the right tools to set a standard for how this should be done. Investing to produce sustainable retirement income and maintain some level of flexibility is a very different challenge than investing and saving for retirement -- and advisors are clearly struggling to find the best way to do this."

More than 350 financial advisors working in 122 national, regional and independent advisory firms nationwide responded to the survey.

Despite the advisors focus on retirement income planning, 54 percent of respondents said that only half of their clients have realistic expectations about how much money their investments will provide them in retirement. Thirty-eight percent of advisors said that running out of money in retirement is one of the most common topics of conversation they initiate with clients, with 34 percent saying that clients often bring up the same topic.

The main obstacles advisors listed as impediments to clients' realistic expectations about retirement income needs included a client's incorrect estimation of how much money they will likely spend in retirement (61 percent), information they get from "non-professional" sources like the media, family and friends (53 percent) and a lack of understanding about how current spending and saving patterns could affect their retirement (50 percent).

Of these, advisors feel that the most difficult obstacles to overcome are misinformation (27 percent) and clients' lack of understanding of how current saving and spending may impact their retirement (25 percent).

"More than ever before, individuals are aware of the risk of running out of money in retirement. Advisors must work with clients to develop comprehensive, outcome-oriented financial plans that are revisited frequently and demonstrate a portfolio's progress towards goals," said Rogerson. "Creating this type of retirement plan benefits both the client and the advisor. Planning helps the client become disciplined, instilling confidence and trust in their advisor. In turn, client meetings are focused, resulting in more efficient and productive conversations for the advisor."

Russell Investments is a global asset manager that offers actively managed multi-asset portfolios and services that include advice, investments and implementation.


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