Courtesy of Covid-19, Americans are thinking more seriously about their health and longevity—and how to pay for them. A new study of consumers aged 56 to 75 by the Alliance for Lifetime Income reveals 70% of them are now more pessimistic about their retirement plans. Changed circumstances are forcing a “reset” of retirement plans and retirement planning, the respondents said. This is trending research, tracking client opinion since the start of the pandemic, and it clearly shows deteriorating confidence and heightened anxiety among the population that has most of the money and drives most advice industry revenues.

So even if you thought clients were initially OK, check again. The number of Covid cases has swollen by more than two million since the first round of research, at the same time the U.S. has seen more than 150,000 additional deaths, a GDP that has fallen by an all-time record 32.9% in the second quarter of this year, and 33 million Americans filing unemployment claims.

Stuck at home more often and battling new financial uncertainty, millions of clients are rethinking their forward path—both qualitatively and quantitively. Social media is awash with a new wave of “mindfulness” and “changed priorities.” This is good stuff and overdue in our crazy lives, but we need pragmatism and precision. We can no longer characterize “retirement” as a hazy image in the far away future. It’s here—and it’s got bills to pay. Twenty percent of the survey respondents said they were delaying retirement, and only one-third were very confident they could cover their retirement income needs.

Certainty is the antidote for uncertainty, but many clients are finding straight answers to their simple retirement income questions elusive. It seems that converting an investment plan into a retirement paycheck is not so simple, and many financial advisors are proving ill-prepared to have that conversation. A study released last year by the Investments & Wealth Institute (the former IMCA) showed that long before the pandemic, six of the nine most important issues to advisory clients involved longevity planning. The No. 1 issue was retirement income.

We urgently need to reduce clients’ anxiety and help them improve their confidence. Human beings don’t do well with uncertainty, but they do even less well with fear. Covid-19 has created much of both in aging people—who happen to be our clientele.

Revise The “Rules”
Start by clearing the deck of old assumptions that no longer apply—like the 4% rule. A new white paper by Colin Devine (my colleague at the Alliance for Lifetime Income) and Ken Mungan (chairman of the consulting and actuarial firm Milliman) lays out the need for a more dynamic—and personalized—approach. Greater client longevity, greater market volatility and lower interest rates are individually well-known trends, but together they create a perfect storm working against simple, broad-based guidelines like 4% withdrawal rates. And that’s the bad news for the industry—greater customization for retirement solutions is going to be required from here on in unless the client has so much money that precision and protection don’t matter. And that’s a small percentage of the clientele.

Refine Your Buckets
Long gone are the big blob accounts with all the family assets in one place. The proliferation of services, jobs, retirement plans and IRAs has created an accounting and organization nightmare. Which account to tap first? Where is the tax optimization and withdrawal prioritization? A survey by one of the largest brokers places this problem of account selection as its top issue, tied with account security. Is anyone listening?

Some top advisors create order out of the chaos by giving specific accounts a funding objective: Here is the account for age 70-plus income. This other one is for medical care; another is for vacation, another is for legacy. And in the perfect scenario, the tax savings boost retirement income.

Update Your Product Choices
I was recently asked during a webinar for tips on overcoming clients’ aversion to annuities. Actually, I’m not sure why advisors still believe in this supposed distaste when most real-world consumer data tells us something very different about client desires. Cannex just released a study that shows the disconnect: While only 14% of advisors think the average client is interested in protected income from annuities, 42% of consumers said they are, or in fact already own an annuity. The message to me seems clear: Clients are beginning to ask more about these vehicles and are looking for many ways to protect their retirement income. Those advisors not paying attention to this stand the chance of losing clients.

Take a closer look at the advantages provided by some of these vehicles. These aren’t your dad’s products anymore—some products like deferred income annuities provide longevity protection or even a simple funding mechanism for basic household expenses. Annuities aren’t for everyone but who doesn’t want a paycheck in retirement? It’s not an “all or nothing” game—it’s just part of an advisor’s job to diversify solutions and divide up accounts. They have to simplify things for their clients and ignore the noise from competitors who don’t have their responsibility for real-world client solutions.

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