Blanchett: Advisors Say They Discuss These 7 Retirement Issues. Clients Disagree.
There are notable gaps in the retirement income planning services financial professionals think they are providing to clients compared with the services investors are actually reporting they receive, according to the latest research from David Blanchett, managing director and head of retirement research for PGIM DC Solutions.
Blanchett’s analysis, published in partnership with the Alliance for Lifetime Income, shows the vast majority of financial professionals say they talk with their clients about how to handle required minimum distributions. Yet only about half of investors working with financial professionals report discussing RMDs with their financial professional.
Likewise, while some seven in 10 financial advisors say they frequently bring up how individuals will spend their time in retirement, fewer than a third of clients report their advisors frequently do this.
Overall, the analysis suggests investors and retirees “really, really, really” want comprehensive retirement planning services, Blanchett wrote on LinkedIn. Unfortunately, advisors seem to think they are doing a better job meeting this demand than the client survey results would suggest.
“What’s the solution here? Advisors need to both up their game in terms of providing more retirement income planning services as well as up their knowledge,” Blanchett wrote.
That said, the disconnect is also an issue for clients, who may not remember certain topics of discussion given the myriad of topics commonly discussed in advisor meetings.
“What this suggests is that advisors potentially need to be more tactical in how they address these specific issues,” Blanchett writes in the report. “For example, some kind of checklist or materials directly addressing each of these key aspects of retirement may ensure that investors are getting the holistic retirement guidance the financial professional is striving for.”
Here are seven important service areas where there appear to be sizable gaps between advisors and their clients.
1. RMD Planning
A whopping 97% of advisors surveyed said they talked with their clients regularly about how to handle RMDs, but only 54% of investors working with financial professionals note discussing this with their advisor.
Not only is this one of the biggest gaps identified in the survey between advisors’ and clients’ perspectives, it’s also one of the most potentially damaging.
That’s because missed RMDs come with big penalties, and because waiting to make tax-deferred account withdrawals until RMDs kick in under the law is often a suboptimal strategy from a tax management perspective.
2. Retirement Lifestyles
While 70% of financial advisors say they frequently bring up how individuals will spend their time in retirement, only 29% of clients note their advisors frequently do this.
That’s a major gap, Blanchett warns, and its also an area where failing to do the planning legwork can result in poor retirement outcomes. Simply put, building a satisfying life in retirement requires more than having sufficient assets.
As other research has repeatedly shown, factors such as social connection and healthy habits also seem to matter a great deal to happy retirements. Financial advisors and their clients must account for the “where” and “why” as they build retirement plans.
3. Protected Income
While 97% of investors say wealth “protection” is moderately or very important in their vision for retirement, only 79% of financial professionals do.
