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ING's Lindberg on Retirement Income Planning for Advisors
Friday, November 2, 2012
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new retirement income planning practice management program from ING Financial Partners, the broker-dealer of ING U.S., was announced on Tuesday. The program offers ING's 1,400 advisors training and education on various aspects of the planning process. Financial Planning talked with ING Financial Partners president, Karl Lindberg, about why a solid understanding of retirement income planning is so important for advisors and their practices. 

Retirement income, how important is this issue? Why is it gaining so much attention recently? 

Recently, it's primarily because as more people retire -- it's something like 10,000 Baby Boomers a day, it's a significant number -- there's a focus on making sure there's income they can live on for the rest of their lives.  

It's a lump-sum amount that many Baby Boomers retire with today. Over the last 10-15 years, defined benefit plans have mostly gone away and now we've moved to defined contribution plans. Many retirees have a pile of money and they have to figure out how to make it last. They're wondering, how am I going to make this last through my retirement?  

With all that's going on in the market…they've lost confidence. If you put all of this together, there's lots of anxiety and there's a focus on retirement income planning.

Are advisors prepared to help clients plan for this? Why or why not?

Advisors have been dealing with helping people plan for retirement for a long time, but there are particular challenges of planning for retirement income; it's a different thing and it isn't simple. It's not a one-product kind of thing, it's a process.

Many advisors are not prepared in that they haven't vetted out their processes for retirement income planning with clients and all the areas they need to address. There's healthcare, social security payments, longevity risk, and more.  It's a different process and it's different planning than accumulation planning. When you talk about taking money out, it requires a lot more planning.

The typical advisor doesn't have a defined process in place to do this. Our new retirement income planning practice management program for advisors gives them a track to run on. If you leave it up to each individual to develop on their own, it's going to be challenging. That's why we've developed this program.

Why is it so crucial for advisors to be ready to help clients plan for income in retirement?

Studies and statistics have shown that clients will leave advisors helping them accumulate assets to go to someone who can help them plan for retirement. 

To retain clients, it's import to demonstrate and prove that you can help them plan for retirement. People have built up assets, their 401Ks, etc., and some maybe had no need for an advisor, but now they do, so the opportunity is going to be being able to prevent that and retain clients. 

And obviously advisors want to do do a good job for their clients. They care about their clients…It's important for advisors to be prepared because it's a way to help them get clients, retain clients and do the right thing for clients.

What are the biggest mistakes advisors make regarding retirement income planning?

There are a lot of mistakes advisors can make; not being able to understand a client's values, being too aggressive or being too conservative. You can't just put money under a mattress or put it all in. You need a balanced, well thought-out process.

In a follow-up email statement Lindberg added more:  

Many financial advisors have difficulty changing their portfolio management approach when clients are saving for retirement – methods tend to focus more on wealth accumulation – to when clients need to draw income from their savings during retirement. The reason for this common mistake is because there are not generally accepted methods for portfolio management focused on retirement income distribution. Modern portfolio theory doesn’t apply here when it comes to constructing a lasting income-generating portfolio...

When it comes to planning for retirement income, financial advisors fail when only focusing on investment support. Effective long-term planning must include a commitment to the retirement income market and a customized approach to managing client portfolios.

The first step in successful retirement income planning where financial advisors can go wrong is the exploration phase. There needs to be a deep understanding of a client’s full financial picture, which requires a deeper data-gathering approach.

What should advisors be doing differently?

Advisors can't just shoot from the hip. They need to have a thorough process in place of how to approach retirement income planning with clients. It's different than accumulation and it's different than what they've been doing. Advisors need specific education and training and a defined retirement income planning process that you can use with all of your clients.

What else? Is there anything you'd like to add? 

The retirement income planning practice management program was developed out of a need that we had. There was a clear desire from advisors to have a structured program…There's a huge need and appetite for advisors to learn about retirement income planning. 

Retirement planning is one of the cornerstones of our business. As we develop as a retirement company, ING U.S. has aspirations to become America's retirement company. 

(1) Comment
As a former advisor and current client, I know first hand how daunting of a task generating retirement income can be. There is plenty of information available about how to accumulate wealth during our working years but how exactly do we turn that into income during retirement? The pension plan or defined benefit plan is nearly extinct for most private sector workers. My current advisor gave me a book called "Savior Retirement" to read. I don't necessarily agree with everything in the book but it was a really easy and eye-opening read none the less. http://saviorretirement.com/ I'm glad my advisor asked me to read it. I learned a few things in there that I hope to apply to my own nest egg in an effort to NOT outlive my retirement income. Best of luck!
Posted by Nathan L | Monday, November 05 2012 at 6:12PM ET
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