Beginning in 2008, 73 million baby boomers will
start to retire or qualify for Social Security, putting US$19 trillion in
assets, $12 trillion of which are currently in retirement accounts, into
liquidation mode. If firms are not ready to advise on the distribution
phase and build an appropriate business model that rewards financial
advisors while creating a good value proposition for the clients, they
could see a considerable outflow of assets.
Retirement distribution and income planning has been
described as “the missing link of financial planning” for households
in the developed world. Until the last year or so, financial planning had
been exclusively focused on the accumulation phase, often leaving a void
in clients’ financial plans when it came to the important decisions that
investors had to make as they approached retirement. Many aspects of
retirement, from lack of tools to advisor compensation, conspire to work
against baby boomers, who thought they had accumulated enough assets to
enjoy a comfortable transition.
In a new report, Retirement Income and
Distribution Planning, Celent discusses the underlying factors of the
post-accumulation world, the difficult decisions involved, and the tools
available to advisors as they guide clients in planning a successful
retirement. New tools have been developed, but more are needed to handle
the many uncertainties that may occur over the distribution phase, a
period of time as long or longer than the accumulation phase in which
people saved and invested in building a pool of assets. “Retirement
income and distribution planning constitutes the Holy Grail for North
America’s mass affluent and high net worth client segments,” according
to Robert J. Ellis, senior analyst
with Celent’s Wealth Management practice and author of the report. “The
ultra-high net worth do not need to plan, and the mass market segments
often don’t have enough assets to make planning worthwhile.”
Ellis adds, “For target groups, mistakes in the
post-accumulation phase can have a dramatic impact on one’s retirement
lifestyle. There is simply no room for error.”
The report offers a look at the nature of retirement
income and distribution planning and examines its significance in terms of
both individual clients and society as a whole. The report also discusses
why the distribution phase is so different from the accumulation phase.
The report goes on to assess a variety of planning
software providers’ offerings for handling the post-accumulation
planning phase, including systems from AdviceAmerica, ASI, CGI,
EISI, eMoney Advisor, Fidelity, FundQuest, Impact
Technologies, Money Tree, NorthStar, PlanPlus, PIE,
and Windham Capital. These planning systems are examined in a high
level of detail, then compared utilizing Celent’s ABCD Vendor View. This
analysis shows at a glance the relative position of vendors based on
Advanced Technology, Breadth of Functionality, Customer Base (number of
paying clients), and Depth of Client Services.
Additionally, the report analyzes unique retirement
income and distribution planning tools from smaller vendors, as well as
some types of tools that are generally less well known. Lastly, the report
makes some projections for the future of retirement income and
distribution planning and reaches some general conclusions about the
space.
The report is 78 pages and contains 37 figures and
five tables. Many of the figures are screen shots of different existing
and developing post-accumulation financial planning systems. These screen
shots are selected to highlight tools that advisors need to help their
clients plan their post-accumulation retirement phase and appropriate
distribution of their assets.
The report’s table of
contents is available online.
