Advisers Concerned About Clients’ Retirement Preparedness

Think rising health care costs or the potential decreasing of Social Security benefits is the biggest threat to your client’s retirement security? You’re in the minority.

In fact, according to the study of 1,305 independent financial advisers, completed by registered investment adviser Curian Capital, LLC, 40% of advisers think a lack of sufficient time to build wealth is the biggest threat to a client’s retirement income plan.

Rounding out the top three concerns were inflation eroding purchasing power during one’s retirement years (22% of advisers) and stock market volatility (20%). Rising health insurance costs was cited by 17% of advisers and only 1% of advisers said that a decreasing of Social Security benefits was a threat.


Enough Money?


The majority of advisers express concerns about their clients’ retirement savings adequacy to meet their expected standard of living. Only one in ten advisers think that more than 80% of their clients will have adequate funds during retirement to meet their expected standard of living, while 30% estimated that between 61% and 80% of their clients were going to be prepared financially.

Almost all (97%) of those surveyed view income planning tools as contributing to their value add, but 56% would still like to outsource some of this planning to a third party asset manager. Of those, 68% would like to outsource the planning and asset allocation, while 28% would just like to outsource the asset allocation duties to a third party.

When asked about their role in income planning, 42% of advisers believe their most important job is determining required savings and portfolio structure to meet future retirement needs, while 31% say it is managing the portfolio along with distributions and withdrawals during the income draw-down phase. More than half (65%) of advisers said they build solutions based on the client’s total portfolio, while only 35% keep retirement assets separate from the client’s other assets.


In Retirement

For those who are prepared for retirement, advisers are most commonly using variable annuities (73% of advisers), separately managed accounts (69%), and mutual funds (60%). Fixed income was used by approximately one-third of advisers and only 9% were using a target-date product.

For those clients who have a gap between their current assets and what they need for retirement, advisers are still using the same three preferred products, but are more likely to use mutual funds (64%), and less likely to use the other four products: variable annuities (67%), separately managed accounts (55%), fixed income (12%), and target-date funds (8%).

“The survey findings speak to the need to make retirement income a primary concern when developing an investment strategy, regardless of the client’s age,’ said Michael Bell, president and chief executive officer of Curian. “The challenge advisers face is getting investors to understand that the traditional approach to income planning may not allow them to achieve the standard of living they are expecting in retirement. By exposing this shortfall and effectively positioning managed accounts as a customizable retirement income solution, advisers can add real value to their client relationships.’