Langlois: Near-retirees are anxious. We've done some work with consumers and they're anxious because they've seen how fast the world can change. Many of these folks, maybe half of them if you look at the data, have some form of defined benefits plan. I recently heard a consumer say, "You know I don't know whether my advisor is going to do much better than I, because given what I just went through, we didn't seem to be doing so well." What we saw with the younger two people on the panel was a sense that they have a longer runway, right? They had an attitude of, "I'm not really going to worry about this now. I'm going to get my business going."
Lynch: Generally what we see is the fear. The behavioral change we are observing is that people are putting off retirement, as they're not sure that the nest egg they built up is adequate. There's a flight toward more conservative investments. There's a desire for yield income that the industry is trying to keep up with through new products. But there's less of a willingness to take risk with the retirement assets and a recognition that the nest egg needs to be a whole lot larger if it's going to last 20 years into retirement.
Carney: What I was referring to [is] a behavioral change. It's not just about the numbers, it's about advising them. It's not just about the financial piece, and it doesn't mean you are going to be a psychologist, but it's the basic things that anybody will go through when they're going to think about retirement.
Wertheim: Our feedback from advisors is that when they tell their clients about their process for generating income during retirement and lay out a plan for the client, it alleviates a lot of fears. We have been educating our advisors about using a time-segmented income distribution strategy, and we've been really focused on this since 2009. We have a comprehensive platform that includes education and coaching, marketing, an integrated platform for managing retirement income streams with an internal retirement income desk for support. Clients want to know how they are going to get there and what do they need to do to generate a lifetime income check during retirement.
FA: One thing you may have seen as a result of the financial crisis is a growing interest in alternative investments-they're going mainstream now. Traditionalists question this. Do you see it as a long-term viable trend?
Atkinson: I think people are going to sell the heck out of it. It's a sexy story. Do I think most clients need it in their portfolios? No, probably not. A few of them will. If you have a diversified portfolio and you plan properly, you don't need to add speculative alternatives. You're not really buying investments there. You know they are adding this asset class, but we want to stick to our knitting for clients and educate them about investing. The issue I have with alternatives and managed futures is that you really can't predict what the return is going to be because there is no income. You're simply speculating on price.
Lynch: We are seeing the mainstreaming of alternatives and the demand is coming down market, driven in part by advisor knowledge and, more importantly, lack of knowledge. Broker-dealers generally, and other industry partners that advisors have, are not equipped to meet advisor demand currently with respect to alternatives, whether it's managed futures or REITs or whatever. There's not sufficient knowledge at the product due diligence level among distribution organizations in our industry to meet this emerging advisor demand. We've done some studies that show that two-thirds of advisors indicate they are going to use/sell more alternatives in their recommendations this coming year, right? However, the E&O carriers are really not eager to cover it.
FA: What are you seeing on your platforms, James?
Carney: We have data and it's based on RIAs, wealth managers, private banks and family offices. Our client base consists of well over 1,500 firms, some large and some small. The alternative investments are growing at a 30% increase over last year. The difference may be due to the fact that RIAs understand what they are investing in because they do their own due diligence. Often, it's a very specific need for the allocation-for example,
REITs for meeting a real estate allocation need. Some [non-traded] REITs now have offerings with a daily NAV. Advisors are clearly increasing the use of REITs as part of their strategic allocation.
FA: Stephen, what are you seeing in terms of alternatives?