On October 2^nd, financial advisors and industry professionals across the globe are celebrating World Financial Planning Day. On this day, we come together as a global community to raise awareness and reinforce the importance of working with clients to develop a financial plan to help them reach their short-term and long-term financial goals.

In light of this noteworthy event, it’s important to address one of the biggest financial planning challenges facing our country today. The retirement income challenge is real and growing, as pension plans disappear, the solvency of Social Security is coming into question, and more Americans are undersaved at the same time they are living decades longer.

Our annual Advisor Authority study of roughly 1,600 RIAs, fee-based advisors and individual investors found that saving enough for retirement and generating reliable income during retirement are among investors’ top 10 financial concerns. That’s where advisors like you are stepping up, to help investors prepare for and live in retirement.

Retirement Income Creates Greater Confidence

According to Advisor Authority, the number one reason investors work with an advisor is to feel more confident in their financial future. Clients feel more confident and are more satisfied when their advisor develops a formal financial plan—especially a plan for retirement income. In fact, the Nationwide Retirement Institute found that 40% of clients with a formal retirement income plan give their advisors a perfect 10 in satisfaction—three times more than clients without a plan. What’s more, 56% of people 11 to 15 years away from retirement would consider switching to a new advisor who developed a written retirement income plan for them.

As investors work with you to plan for a retirement that could last 20 to 30 years, or more, their concerns about outliving retirement savings—and finding a source of guaranteed income they can’t outlive—rise to the forefront. To address these concerns, nearly nine-in-ten (87%) RIAs and fee-based advisors have a strategy in place to protect clients against outliving their savings.

As you know, a strategy to protect your clients against outliving their savings should start early, and it requires the right solutions at every stage of their financial lifecycle, from accumulation to retirement income to legacy planning. But what many RIAs and fee-based advisors may not know, is an entirely new solution for more holistic retirement income planning is here—and growing.

Now, there is a new category of fee-based insurance and annuities that are built to fit the way you work. This means greater simplicity, transparency and choice, as well as more seamless capabilities for technology integration, fee-management capabilities and licensing. As this category continues to expand, and new types of products emerge, you can now use insurance and annuities in ways you might not have considered—as a tax management tool, as a way to manage legacy planning and charitable giving, and as a boon to retirement income planning.

Fee-Based Annuities For Guaranteed Retirement Income

Where your client falls in the financial lifecycle will impact what annuity you use—from variable to fixed, immediate to deferred—to meet their retirement income needs now or in the future. For example, for clients that need income now, a fee-based single premium immediate annuity (SPIAs) typically provides an income stream immediately after the client makes an initial lump sum investment. For clients who need an income stream that starts in the future, fee-based variable annuities (VAs) may be an option after they max-out qualified plans.

For a client that needs income soon (within 2-10 years), a fee-based VA with a lifetime income rider can offer tax-deferred accumulation, with upside potential and downside protection, and the option to turn on a stream of income for life that they can’t outlive. For a client that needs income later (10+ years away from retirement), they can access more tax-deferral with a simple fee-based investment-only variable annuity (IOVA), or you might consider a VA with a living benefit that allows for greater equity exposure and more investment flexibility, to maximize accumulation while also providing a floor for downside protection.

Adding guaranteed income to a portfolio can improve client outcomes. To enhance Nationwide Advisory Retirement Income Annuity (NARIA), our simple, transparent VA with “advisory friendly” fee-management capabilities, we recently announced the launch of Nationwide L.inc Advisory, a new optional living benefit. L.inc Advisory offers a 7% interest roll-up—one of the highest in the industry—and one of the industry’s highest payout rates. (As of 8/1/19. Statistics reported by VARDS on vards.com. This considers guaranteed income for life and excludes competitors that decrease income when the contract value reaches zero.) It gives RIAs and fee-based advisors a new solution for guaranteed lifetime income, that will never decrease and that clients can never outlive, even if their contract value falls to zero.

New Ruling Simplifies Fee-Based Insurance For RIAs

The right retirement income plan can help your clients save more for retirement, generate more income and mitigate longevity risk. According to Advisor Authority, more than half of RIAs and fee-based advisors (53%) protect their clients against outliving savings using a VA with living benefit riders, such as a guaranteed minimum income benefit or guaranteed lifetime withdrawal benefit. Notably, more than one-fourth of RIAs and fee-based advisors (27%) say that market volatility would make them even more likely to use variable annuities with living benefit riders to generate retirement income.

Now, a favorable private letter ruling (PLR) from the IRS recently received by Nationwide makes it easier for you to adopt fee-based insurance and annuities into your practice. The ruling concludes that the payment of an advisory fee from certain non-qualified annuities—including variable, fixed indexed, or hybrid products—can be structured to not give rise to a taxable distribution.

As a result of this PLR, the tax treatment of properly structured advisory fees from Nationwide’s non-qualified annuities will now effectively conform with those from qualified accounts such as 401(k)s, 403(b)s and IRAs. This new PLR removes a key friction point, eliminating the added cost, complexity and frustration of fee management, to benefit your clients—and your practice.

Among important guidelines cited in the ruling, the advisory fees you receive for the non-qualified annuity cannot exceed 1.5% annually of its cash value. (It is unclear whether an advisory fee in excess of the 1.5% limit would be entirely subject to the general rule concerning the taxability of withdrawals from an annuity contract or whether only the amount in excess of the 1.5% amount would be subject to the general rule.) The ruling applies only to fee-based non-qualified annuities, where you do not receive a commission related to the sale. The fee is paid with respect to the investment advice you provide specifically related to the non-qualified annuity.

As the retirement income challenge becomes one of the biggest financial planning challenges facing our country today—and as more clients turn to you to help them confront this top concern—take the time this World Financial Planning Day to help them develop a formal retirement income plan. And as new products and new rulings are making fee-based insurance and annuities easier for RIAs and fee-based advisors to adopt into their practice, evaluate where it makes sense to incorporate these new solutions into your clients’ holistic financial plans.

Craig Hawley is head of Nationwide Advisory Solutions.