Advisers Face Obstacles to Offering Retirement Income Planning

As Baby Boomers retiree, advisers and broker-dealers must decide how they will differentiate themselves and deliver an efficient retirement income program.

However, according to the most recent Cerulli Edge Advisor Edition, broker-dealer firms and service agents must supply advisers with the necessary tools and training to begin providing these services, and already time-strapped advisers must make the time to provide this advice.




Despite fears about the savings habits of the Baby Boomers, Cerulli found advisers are generally confident in their clients’ ability to retire. One-third of advisers (35%) are extremely confident, and another third (33%) are moderately confident. Only 14% of advisers are not very confident or not confident at all in their client’s retirement plans.

However, not all advisers are confident in their ability to develop or offer retirement income planning. The largest challenges advisers face are a lack of consumer awareness (70.6% of adviser say it is a major obstacle or somewhat of an obstacle), the time consuming nature of delivery (68.9%), and product complexity (64.1%).

The major challenge on an organizational level is achieving cooperation. This is vital to any retirement income program’s success, the report says. Other challenges include software integration, overcoming resistance to change, and an evaluation of fee structures. As clients draw their assets down, fee-based advisers will actually face declining revenues as clients live out their retirement plan. Further, because their retirement income plan will need to be revisited annually and they are receiving income monthly (creating potential for mistakes and questions), clients will require far more of the adviser’s attention than ever before. Cerulli’s report suggests that the most economic way to account for this is through planning or hourly fees but cautions that the client may resist paying these fees if they have never done so before.

A particularly difficult challenge is understanding how to manage clients after the initial planning stage. Tying a financial plan to a client’s particular financial situation requires more than simply passing a client’s age and investments between two applications, the report notes. There needs to be increased innovation in tools used by advisers, including those that preschedule liquidations from client accounts, as well as the possibility of an alerting system that tells an adviser if a client takes more income than scheduled from his brokerage account. These improved functionalities, and a change to having managed accounts focused on distribution instead of accumulation, will build a tighter tie between fee-based managed accounts and income planning.


B-D Involvement


In developing programs to help advisers in the retirement income market, broker-dealers and providers speak of serving two separate types of advisers, Cerulli says:

  • The first type of adviser is the planning-oriented adviser, who is looking for technology that allows significant customization and personalization. This adviser believes that this personal attention is key to their value proposition.
  • The second type of adviser does not desire as much detail, and values simplicity and ease of use over the ability to carefully personalize. Although this latter, and larger, group of advisers still sees the value of planning in client relationships, advisers are willing to trade a level of specificity in exchange for time efficiency.

One challenge that will be faced by the broker-dealer firms, Cerulli says, is achieving efficiency in a retirement income program. The integration of income planning software with the techniques used by advisers to manage their clients after the initial plan is developed is where many B/D firms see the next wave of technological enhancements. There are multiple functional areas that must be addressed:

  • Advisers need training on how to provide this advice;
  • Technology tools must be developed and rolled out;
  • Complex questions must be supported; and,
  • Appropriate plans must be implemented.

Further, there is need for cohesive communication, within the firms; organizational cooperation is key, the report says. “If diverse groups throughout the organization are repeating the same thing, it will eventually have more impact on their advisers—particularly those who may not have seen the value in providing this type of advice,’ Cerulli says. Therefore, the report says that the best way for broker-dealers to approach this initiative is to create a cross-functional task force.