"Their client relationship management systems contain birth dates, phone numbers and addresses. So they'll know quickly what clients are turning 50, for example, and we suggest a phone call or sending a note along with a birthday card. That lets them know whether they're positioned for a catch-up contribution into their IRA or their qualified retirement plan. Or possibly they can suggest a birthday lunch with a friend, and get a couple of referrals out of it as well.
"If you're starting at a young age where a client isn't necessarily thinking about retirement distribution yet," Tamer adds, "you can position yourself early as the person they can go to for information on their retirement planning."
With regard to compensation, what is the best course to take for advisors entering the distribution phase? How should you manage client accounts going forward? Do you charge clients differently?
Some advisors begin the distribution phase implementing a flat-fee retainer based on the value that they're providing versus a percentage of assets under management. Others incorporate periodic raises that they build into the compensation model. Still others elect to maintain the status quo.
Veteran wealth manager Lewis J. Altfest, the principal and CEO of Altfest Personal Wealth Management in New York, cautions advisors to beware of the added risks involved in the withdrawal phase for both clients and advisors, especially given the recent market declines.
"You want to make sure your staff is paying attention to possible sharp declines in the market early in the retirement period, which could set the entire retirement planning phase back and result in a permanent lower standard of living for that person," says Altfest.
Veteran industry watcher Bob Veres, publisher of the newsletter Inside Information, says he has seen no clear-cut consensus emerge in ten years about whether to switch from AUM charges to flat-fee retainers. The case for one side mounts over the years, he says, but then an outside event intervenes to change matters.
"First the market was going up nicely, and advisors were reluctant to give up the annual increase in revenue they were receiving in the mid-2000s," says Veres. But during the 2008-2009 crisis, "it would have looked far too self-serving for advisors to suddenly switch their clients over to retainers and stop their own bleeding while their clients' retirement portfolios were diminishing.
"Now," he continues, "a significant number of clients are beginning to enter decumulation, and many advisors are once again looking at the flat-fee compensation model. The question is whether the markets will again intercede and throw the timetable backwards.
"Making the shift is not as simple as just having a conversation with the client," he adds. "One of the great things about AUM is that it tends, over time, to give advisors fee increases that more than compensate for inflation-both because of the greater upward trend of the markets, and because accumulators are putting more money in their portfolio."