Retirement Income Sources Depend on Income, Age

Both income and age affect how preretirees foresee funding for their retirement, according to a recent Gallup poll.

Gallup’s “Economy and Personal Finance” poll found that among all preretirees, or nonretirees, the top five expected sources of retirement income were: 401(k), IRA or other retirement savings account (46%); Social Security (30%); savings account or certificate of deposit (CD) (25%); and employer-sponsored pension plans (24%).

However, once the data was broken down by income ranges, patterns emerged. For those with an annual household income of $75,000 or more, the top expected sources of retirement income included: 401(k)s, IRAs and retirement savings accounts (65%); pension plans (34%); individual stocks and/or mutual funds (27%); savings account or CD (25%); and home equity (23%).

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For those earning between $30,000 and $75,000, the top five expected income sources for retirement were: 401(k)s, IRAs and retirement savings accounts (44%); Social Security (33%); part-time work (26%); savings account or CD (24%); and pension plans (22%). For those earning less than $30,000, retirement income sources included: Social Security (42%); part-time work (27%); savings account or CD (27%); 401(k)s, IRAs and retirement savings accounts (26%); and home equity (17%).

The poll found only about one in five young adults expect to receive Social Security once they retire. This age group also believes that even if they do receive Social Security, the payments will be smaller or they will be required to retire at a later age in order to collect it. However, those currently approaching retirement foresee Social Security being a major part of their retirement income. Specifically, with those ages 50 to 59, Social Security (42%) almost tied with 401(k)s and IRAs (44%) as the top retirement income source, while with those ages 60 and older, Social Security was the top source of retirement income (47%).

The poll concluded that, “Wealthier Americans are primarily looking to support themselves in retirement with investments. Less wealthy Americans are much more likely to expect to rely on the Social Security system and part-time work to fund their retirements. And younger Americans, who are dubious about receiving Social Security benefits, are expecting to rely on a more varied group of sources to support themselves in retirement.”

The poll was conducted April 4 to 14, 2013, with a sample of more than 2,000 adults including more than 1,300 nonretirees. More information about the poll can be found here.

What It Takes to Recruit or Acquire

What are the best ways to go about attracting advisers to a firm when it is looking to expand?

Growth at an advisory firm can be organic or inorganic, but advisers should have a strategy for increasing business. (See “Advisers Need Growth Strategy Plan.”) Organic growth comes from a firm’s expansion through increasing customer base, increased output per customer or representative, new sales, or any combination of these. Inorganic growth can occur through a merger and acquisition (M&A), or when a firm takes on more advisers.

“Creating Value and Certainty Within Your Independent Advisory Firm,” a white paper from the Alliance for RIAs (aRIA) details how to realize an ideal model and deploy an inorganic growth strategy. The paper is the fourth in a series on raising awareness of independent and wirehouse advisers to the challenges and opportunities in this channel. 

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Inorganic growth may not be easy to achieve. An imbalance between buyers and sellers exists in the independent space, with many more firms looking to add advisers than there are advisers looking to join a firm, according to aRIA’s research. Getting into M&A and adviser recruiting is as difficult, perhaps more so than starting a business from scratch

This type of growth is a numbers game, the paper contends. Advisory firms that want to recruit advisers will likely need to talk to hundreds of advisers to find the right fit. Neal Simon notes, “Over the past five years, I have spoken to over 200 advisers about joining Highline. This has resulted in three professionals joining our firm in one format or another.” A simple way to think about this is a sales funnel.

The process of winnowing through candidates is a strategic one, John Furey, president and founder of Advisor Growth Strategies LLC, and a managing member of aRIA, told PLANADVISER.

“When we were building Schwab Advisor Services’ platform to lift out wirehouse brokers, we felt to get one deal done, we needed to have meaningful conversations with 10 advisers,” Furey said. “However, to get to those 10 meaningful conversations, we had to connect with 60 or 70 advisers.”

Set Your Target 

But numbers alone isn’t the answer. Do not be a random shooter. It is not difficult, Furey said, but an adviser must be systematic and realistic. “If you can’t articulate some unique proposition to advisers—‘Do we have something to offer them that is better?’—then you shouldn’t try to bring on advisers.”

The come one, come all strategy does not work, according to aRIA’s paper. Advisory firms that are experiencing success have a highly sophisticated and defined “ideal adviser” and they build their platform around the needs of that target. Take the time to understand who you are going after and why, identify their needs and provide a solution for those needs. Niche strategies work, not big tent concepts.

Usually the adviser joining a firm seeks the benefits of independence without having the responsibility of managing a business. Many advisory firms across the country are seeking to recruit advisers from wirehouses, or to tuck in smaller, existing independent advisers, according to the paper.

The reality is that inorganic growth is a blocking and tackling game that requires time, resources and commitment. If an advisory firm does not have the funding or resources to focus, it is probably better off sticking to organic growth or considering other affiliation options.

Some of the other key issues aRIA identified in growth and recruiting M&A are:

 

  • It really is about the money: every deal must be accretive for all sides;
  • A firm will have to go selling: no one will hand you books of business; and
  • A firm’s growth story and messaging must be ready for show-and-tell.

The white paper, as well as other pieces from aRIA’s members, can be downloaded here.

 

 

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