Advisors who manage investments alone miss the opportunity to help clients with expenses and liabilities—and thus address their net wealth. In such cases, a client might be feeling confident about a $1 million nest egg but might not consider their potential longevity and the prospect of funding a retirement that stretches three decades or longer. The reality is that few retirement-age clients have enough in assets to fund their longer lives, including the highly variable costs of healthcare and life care. The new theme is that clients will need to learn how to use limited resources over many years, which demands a new kind of professionalism from their advisors, whose aim is to protect the clients, not the returns. The definition of a “financial advisor” is changing once again and means something besides “investment advisor.”

“No one is asking for a managed account.” This is my personal favorite among the responses of certain advisors, whose perennial foe seems to be any entrepreneur introducing anything new. Other classic responses in a similar vein include, “People riding horses never asked for cars,” or, “People won’t ever need to hear music from or take pictures with a portable telephone.”

In reality, new products rise in profile when consumers start to demand them, and this is always threatening to complacent industries. Stockbrokers in particular never had to answer the question “How am I doing?” in the past. But the industry changed; clients became responsible for their own vehicles, including retirement products like IRAs and 401(k)s. As they did, they started to worry about returns, and then looked for better, more reliable, more transparent solutions than what brokerages offered them. If these clients needed help with this work, independent investment managers and trust companies were only too happy to provide custodial services and performance reports.

“Annuities” have matured to meet consumer demand, too. More than 100 products in a couple dozen categories have filled the annual Barron’s guide to the best annuities. Annuities offer income streams that can be extended to cover someone’s entire lifetime. They can begin at a specific age to match a client’s liabilities, they can include features to offset inflation, and they can incorporate death benefits and name specific heirs.

The unusual power of consumer demand is that consumers may not be able to name what they want—yet they can sure name what it does. Savvy marketers interpret these signals, and then the great innovators build the solutions. The best advisors need not rely on complicated illustrations or labor over lengthy applications when discussing annuities; they can simply talk to the clients about what it is they want to accomplish. Since this involves the client’s self-preservation, this will likely be an emotional topic, and the solution will be an emotional one. Peace of mind is not an intellectual compromise for an advisor.

Emotional arguments likely won’t appeal to the doubters among mostly left-brained, analytical advisors. But clients and their families are very much emotional beings and become more so as retirement looms.

That problem becomes worse as they realize that their own longevity might spoil their plans to enjoy the “go-go” years of retirement. In 2024, more Americans will turn 65 than ever before. (At the Alliance for Lifetime Income, we call this phenomenon “Peak 65.”) The median age of America’s 70 million baby boomers is currently 68. They have more in financial resources than they’ll likely have in a few years. That’s the trend we’re not ready for—and the one that will test the loyalty of clients now hearing about their chances in Monte Carlo simulations.

Advisors thinking of moving into annuities should start small. Very few of the managed account converts went in 100% at the start. Most focused on discrete uses, especially for retirement accounts. Their clients needed to be open to a different approach.

Annuities pose similar opportunities and adoption challenges. When you dive in, you should start by complementing investment portfolios. Instead of a retiree using money from their required minimum distributions, they could keep it invested and working in the markets while using income from an annuity contract. The added value these products offer is to more efficiently solve for specific risks or objectives than can be accomplished by investing.

Change For The Better
No one likes change. New ideas and processes can be clunky, especially in the first years they’re being used. But according to one of the nation’s largest wealth management firms, Morgan Stanley, advisors who are leading this adoption curve are earning as much as four times the net new assets and 100% more revenue growth than those who aren’t. That’s a return on investment even a stockbroker would recommend.

Steve Gresham, senior education advisor to the Alliance for Lifetime Income is also managing principal of NextChapter, a financial industry leadership community dedicated to improving retirement outcomes for everyone. He formerly led the retail client strategy for Fidelity Investments as executive vice president and is the author of five books about wealth management and retirement planning. See more at

First « 1 2 » Next