While you might be afraid of the fiduciary rule and its effects on your business, there are so many reasons to be optimistic about the future of our profession right now. Below is a list of just a few of the changes I believe will continue to impact our industry – and increase the need for quality financial professionals – for years to come.
Defined contribution plans offer better choices, potentially lower fees, and tax-favored investing. However, few plans have mechanisms to provide lifetime income, so the vast majority of Americans need advice on converting their accumulated wealth into sustainable income. The loss of guaranteed income places pressure on assets under management like never before. The planner who can specialize in income planning can differentiate themselves for decades to come.
For long-term retirement savings, the savings rate in the United States remains around 5 percent, and baby boomers have a median retirement account balance of $130,100, according to LIMRA’s 2016 Retirement Fact Book.1 This means as planners, we will be challenged to generate more income with fewer assets than ever before. Clients will value creative and innovative professionals much more than a computer program to solve this problem.
More than half of Americans take Social Security early – only 2 percent of men, and 4 percent of women, defer their income to age 70.2 That behavior tends to cost retirees as much as a 56 percent difference in income at age 70. With Social Security having an inflation factor, the income discrepancy will grow more during retirement. Advisors who can provide meaningful advice on maximizing income will separate themselves from the pack.
Health care is the largest inflationary risk for elderly Americans. The uncertainty around premiums, coverages and providers means that planners must have a conversation about who, how and where will health care be provided during retirement. Knowing this and providing quality advice on health care will become more important as baby boomers grow older.
In the United States, housing wealth is larger than all of the assets under management for both qualified and non-qualified assets. More importantly, many Americans need to downsize or rightsize their housing plans in retirement. Solutions around the proper use of housing wealth and housing lifestyle will only grow in importance as our clients transition from a working career to retirement.
These are just a few of the demographic and social concerns our industry faces as this generation heads to an unknown retirement. Few, if any, of these concerns are likely to be answered by a computer screen and an algorithm. Instead, these issues are real life concerns that need to be discussed, weighed, informed, and addressed with a meaningful and purposeful process. I am confident our profession is well positioned for success for the next several decades.
Look at all the demographic and social changes around us today. These changes will influence many of our clients and prospects for several years to come. If you can address these problems, you are likely to gain market share in your business.
The marketplace is demanding financial professionals to work in our clients' best interest, which will not only need to address retirement income, but also the risk of longevity.
Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of annuities at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”
1LIMRA, Fact Book on Retirement Income 2016: https://www.limra.com/bookstore/item_details.aspx?sku=23518-001
2The Motley Fool, “When Does the Average American Start Collecting Social Security?” April 19, 2016: https://www.fool.com/retirement/general/2016/04/19/when-does-the-average-american-start-collecting-so.aspx
© 2018 Ash Brokerage LLC.