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Grow your client base by focusing on retirement income

Advisors can up their game and attract more clients by offering income-planning expertise to meet the needs of boomers in retirement


Date: November 25, 2016

Planning retirement income can require both advisors and clients to shift gears. Before retirement, the focus is on saving and growing your nest egg. When retirement happens, priorities change.

For retirees, the goal is having enough money to achieve their envisioned retirement milestones, which may include more leisure activities and discovering new hobbies. For advisors, it’s about helping clients realize those dreams by assisting in the execution of a retirement plan.

But in an industry that is often focused on wealth accumulation, retirement “income” planning is an area that at times is neglected by advisors.

It’s a significant opportunity for advisors to step up their game and play a pivotal role, says Rocco Taglioni, senior vice-president, head of distribution, individual insurance and wealth at Sun Life Financial. Those who do focus on retirement income can grow their client base because retirees are actively seeking solutions to a daunting and complex, multi-year process, he says.

“According to Statistics Canada, over the next two decades, six million boomer households will turn 65. They will need to convert assets into a sustainable retirement income plan that will enable clients to draw an income while ensuring they do not deplete their savings,” says Mr. Taglioni.

The advisor skill set required to build a solid retirement income plan can be quite different than those needed for accumulation because income planning is about creating a tax-efficient and sustainable cash flow throughout retirement, he notes.

“Retirement income planning can come with many challenges: from market volatility, to low interest rates, to inflation and increasing longevity,” says Mr. Taglioni. “It can be complex, it must be tailored to each individual and it requires ongoing monitoring and refining.”

Advisors who master the process will not just serve their clients very well; their expertise bodes well for their business too.

“It may be the single greatest opportunity to demonstrate the value you [as an advisor] bring to your clients,” he says.

For decades, Winnipeg certified financial planner Daryl Diamond, author of Your Retirement Income Blueprint, has provided advice to retirees and advisors on how to properly create a tax-efficient and sustainable cash flow throughout retirement.

Mr. Diamond says that continuity is vital to helping clients achieve their retirement goals.

“It’s not just a question of drawing up a plan, then plug and play, and away you go,” he says. Mr. Diamond recently travelled across Canada discussing the subject with Sun Life Financial advisors.

“Where a client really needs his or her advisor is not just to set up a plan, not just to align the portfolio to the plan, but to actually be able to help execute the plan, year after year.”

Central to success is the ability to create a sustainable withdrawal rate from clients’ investment assets and balance it with any guaranteed sources of income to comfortably pay for clients’ monthly expenses, says Mr. Diamond. This is particularly important in the early days of retirement because poor decisions in the first few years can lead to long-term negative outcomes that are difficult to undo.

For example, if a retiree is facing running out of money at age 76, he or she isn’t likely to go back into the workforce, says Mr. Diamond.

Market upheaval can also be an issue. Before retirement, an individual can take advantage of volatility and buy into the market at a low price for long-term gains. When retired, it can be too late to make that move. On the other hand, if markets are unfavourable leading up to, or in early retirement, and the client suffers losses on their investments, it’s very difficult to recover; they don’t have time to make up losses and they’re drawing income from the same investment that has suffered the loss.

“That’s a big difference from the accumulation phase,” says Mr. Diamond.

The question for many retirees and their advisors is: How do you deal with market volatility when drawing down capital?

To address this challenge, the industry is responding with products to help advisors provide more options for their clients, says Mr. Taglioni.

“Life annuities are increasingly a good option to help build a guaranteed income floor when combined with workplace defined benefit pensions, CPP (Canada Pension Plan) and OAS (Old Age Security),” he says.

Mr. Taglioni recommends that advisors suggest a starting point – “Allocating a percentage of clients’ retirement savings to a life annuity to provide guaranteed lifetime income, to make sure their basic expenses are covered.”

The remaining capital can be invested using a variety of products, depending on the clients’ individual needs. Among the more notable options are GIFs (guaranteed investment funds), which can help meet a client’s needs at different life stages with certainty, through a combination of growth potential and capital protection.

Each client is different, notes Mr. Diamond, so every solution will be too. But the overarching goal is around converting capital into spendable dollars. In this respect, investments are only half of the equation – advice is the other.

“That’s why there is no better place for advisors to justify their involvement than in this crucial part of the retirement planning process,” says Mr. Diamond.

Advisor SunLife


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