Most Valuable Service is Helping to Maintain Perspective

More than half (55%) of advisers say the most valuable service they provide to clients in or near retirement is helping the client maintain perspective and think clearly about events and trends. 

According to Russell Investments’ latest Financial Professional Outlook (FPO), a quarterly survey of U.S. financial advisers, creating a retirement income plan (39%) and reducing portfolio volatility (34%) are the second and third most valuable services they provide to clients.

Disparity − or a “value gap”− is revealed when survey participants were asked how clients would respond to the same question, according to a press release. When asked to consider where retired or near-retirement clients see the most value from them, responses included protecting portfolio principal (56%) and providing sufficient income (48%). However, less than a quarter of advisers agree that either of these is the most valuable service they provide.

The majority of advisers surveyed indicated they believe their clients have realistic expectations about retirement (68% of advisers say less than 40% of clients have unrealistic expectations). The survey also showed the most common topics of conversation advisers are initiating with clients in or near retirement include generating sufficient income (50%), portfolio rebalancing/shifting asset allocation, and discussions about running out of money in retirement.

When asked what tools they use to facilitate conversations with clients who have unrealistic expectations around retirement, there is no consensus. About one third (37%) of survey respondents say they use a detailed plan, followed by 16% who give a presentation about how to think about retirement, and 14% who say they use a blank piece of paper. Ten percent of the survey group selected “other” and put forward more than 20 other types of tools and approaches they use to support conversations around retirement income planning.

Each quarter, the Financial Professional Outlook survey asks advisers about both their sentiment and their clients’ sentiment with respect to the capital markets broadly over the next three years. In the latest survey, optimistic sentiment dropped among both advisers and clients and the “sentiment gap” between the two groups widened; there is a 59% gap in adviser-investor optimism, versus 48% last quarter.

Overall, 72% of advisers report being optimistic about the capital markets broadly, versus 13% who cite being pessimistic. With respect to the clients’ perspective, 13% of advisers feel their clients are optimistic about the capital markets this quarter, down from 29% in the June 2011 survey.

For the current installment of the survey, Russell collected the opinions of 374 financial advisers working in nearly 150 national, regional, and independent advisory firms nationwide. The survey took place between July 28 and August 12.