Average Withdrawal Rates Decrease
Two trends emerged from a recent study conducted by the Financial Planning Association on retirement income. One, retirement planning is increasingly playing a bigger-and lucrative-role in the average financial planner's practice. Second, the average sustainable withdrawal rate used by advisors dropped fairly significantly versus prior years.
For advisors who use a systematic withdrawal program with clients, the average withdrawal rate was 4.4% in the latest survey. That continues a downtrend in recent years. The average rate in the 2007 survey was 5.3%, and in 2008 it was 5.0%. The recession, and its impact on portfolios, is presumed to be the reason for the lower rate.
Baby boomers are shifting from accumulating assets to living off them, so it's no surprise that retirement planning is becoming a larger piece of the puzzle for advisors. Survey respondents said 53% of their clients received some sort of retirement income assistance-products, services or guidance-during the past year. And 63% said that percentage increased over the prior year.
Retirement planning comes with its own set of complexities ranging from calculating a client's income needs over a retirement lifespan to calibrating the best asset allocation mix and developing a withdrawal strategy. But these are marketable skills, and 91% of survey respondents said they were able to leverage their retirement income background into acquiring new clients.
"Highlighting their expertise in retirement income planning appears to be a successful means of marketing their practice," the report concludes.
The asset distribution phase means less assets for advisors to oversee. Nonetheless, survey respondents on average expect retirement income-related revenue to grow almost by one-third during the next five years due to consolidating more of their client assets and higher fees associated with various planning and distribution services.
The 2009 Financial Advisers' Attitudes and Perceptions About the Retirement Income Distribution Market study was conducted in August with 460 participants. The study was produced by the consulting firm Diversified Services Group and was sponsored by Nationwide Financial.
UMAs Slow To Win Fans
(Dow Jones) For years, the brokerage industry has been touting unified managed accounts as the next big thing, but financial advisors and their clients evidently haven't gotten the message.
Unified managed accounts, or UMAs, were supposed to be an improvement on one of Wall Street's standby investment vehicles for the wealthy--separately managed accounts, or SMAs.
SMAs are investment strategies of, say, 20 to 40 stocks held in a brokerage account but overseen by an outside money manager. SMAs can have lower investment fees and lead to fewer tax bills than mutual funds, but they've always been a big source of back-office headaches because financial advisors have to open a separate account for every investment strategy a client uses.
UMAs are designed to streamline the process, allowing for SMA strategies, mutual funds, exchange-traded funds and other assets to all be held in the same account.
But a recent report from Boston-based consulting firm Cerulli Associates concludes UMAs have lately shown "underwhelming growth," in large part because they failed to accommodate one of advisors' biggest concerns over the past 18 months-the inability to quickly yank investors out of the stock market and put their money into bond and money market funds.
Cerulli says the participation rate of 15% of advisors actively using UMA programs is below industry expectations.
Copyright © 2009 Dow Jones & Company, Inc.