More and more Americans are counting on financial advisors to help them prepare for a secure retirement. But what if they're not up to the task?
Mitch Politzer, senior VP of Lincoln, Nebraska-based Ameritas Advisor Services, had a suspicion that might be the case, so he teamed up with Chicago-based market research firm Spectrem Group and put together a survey aimed at testing advisor know-how and opinion on the kinds of investment products available on the market today. "The results of the survey showed that most financial advisors are really very skilled at investing for their clients, as they're driven by equity markets (and to a lesser degree bond markets) and a desire to outperform industry benchmarks," Politzer says. "This works for the accumulation phase of a client's life, yet advisors are less skilled when they have to shift gears for the phase of a client's life when they're interested in income and sustaining their assets."
Most advisors, Politzer says, seem to have dated beliefs about various retirement products, are slow to innovate, and most are gun-shy when it comes to annuities. According to the survey, 70% of advisors are concerned about locking their clients into a long-term retirement income product, and if they do, they would prefer the product not be an annuity.
The debate about annuities–an asset class that for many years had more negative headlines than positive associated with it–is an ongoing one, and even if there has been a sea change in these instruments (particularly with respect to their transparency) and the way in which they're marketed, it is still taking a while for financial advisors to appreciate their use. This is normal, Politzer says, since "most advisors formed their beliefs when annuities didn't have the features they have now."
Indeed, the annuities of yore were expensive and inflexible, Politzer says. They were not the easiest of products to understand or use, and they certainly lacked transparency. Today, they're low cost, they can provide guaranteed income and they don't require a client to annuitize in order to get a benefit because they don't have fees associated with them. Today's annuities also don't have any withdrawal charges associated with them, Politzer says, so advisors have greater flexibility than they had before.
