Paula’s Longevity Risk
When working with constrained investors like Paula, a risk that the advisors are bound by fiduciary duty to address is longevity risk. In a recent article, I called out Ken Fisher for this statement he made in a video:
“Anything you want to do with annuities, there’s a better way to do.”

I asked Mr. Fisher a question which remains unanswered:
If a client wants a lifetime guaranteed income, what vehicle provides a better way to provide a lifetime guaranteed income?

Paula is a healthy female 65 years of age, whose mother lived until age 95. This means that Paula’s longevity risk is significant. I cite the words of Nobel Laureate, Robert C. Merton:

In retirement it’s your income, not your wealth, that creates your standard-of-living.

Merton’s statement is brilliant in its simplicity, which cuts through a great deal of needless complexity. I like to say this: No retiree stops needing income. That includes a retiree like Paula, someone who, if she outlives her mom by only six years, will reach age 101.

There is but one income-producing vehicle that an advisor can count on to be paying his or her client at age 101. That, Mr. Fisher, is a lifetime income annuity.

Time For The Annuity Industry To Rally (In A Different Way)
I know of only a single trillion-dollar industry that has been unable to effectively communicate its own value. Why? A consuming, product-centric way of thinking. For decades, the annuity industry has, without success, sought to change the way RIAs think about the “product.” It will not work. What will work is an initiative that changes how investment advisors think about the “client.” That is what I am attempting to do as I write these words. If you are a fiduciary advisor reading these words, have I made progress? Does the three-part client segmentation construct make sense to you? Have I succeeded in demonstrating how the constrained investor’s retirement security can be jeopardized when key risks are left unmanaged?

I feel like I am doing God’s work here. Income planning for constrained investors must be different than what can be appropriately used with other investors. The stakes for constrained investors are simply too high. The potential financial impact of unmanaged risks, too adverse. Ask Phil if he enjoyed experiencing a retirement featuring “portfolio ruin.”

Time To Rally
I call upon the investment advisor community, chief executives of annuity providers, presidents of broker-dealers, top annuity wholesale distributors, leading annuity industry consultants, rank-and-file brokers, and insurance agents to come together in an initiative that results in the annuity industry rallying round the constrained investor planning construct. It is time to foster a new era of best serving retirees.

David Macchia is an author, public speaker and entrepreneur focused on improving the current state of retirement income planning. He is the founder of Wealth2k Inc, and the developer of the widely used retirement income solution, The Income for Life Model. Recently, Macchia developed Women And Income, the first retirement income solution developed to address the differentiated needs and preferences of female investors. He is the author of the consumer finance book, Lucky Retiree: How to Create and Keep Your Retirement Income with The Income for Life Model.

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