Blanchett: Advisors Say They Discuss These 7 Retirement Issues. Clients Disagree.

There are notable gaps in the retirement income planning services financial professionals think they are providing to clients compared with the services investors are actually reporting they receive, according to the latest research from David Blanchett, managing director and head of retirement research for PGIM DC Solutions.

Blanchett’s analysis, published in partnership with the Alliance for Lifetime Income, shows the vast majority of financial professionals say they talk with their clients about how to handle required minimum distributions. Yet only about half of investors working with financial professionals report discussing RMDs with their financial professional.

Likewise, while some seven in 10 financial advisors say they frequently bring up how individuals will spend their time in retirement, fewer than a third of clients report their advisors frequently do this.

Overall, the analysis suggests investors and retirees “really, really, really” want comprehensive retirement planning services, Blanchett wrote on LinkedIn. Unfortunately, advisors seem to think they are doing a better job meeting this demand than the client survey results would suggest.

“What’s the solution here? Advisors need to both up their game in terms of providing more retirement income planning services as well as up their knowledge,” Blanchett wrote.

That said, the disconnect is also an issue for clients, who may not remember certain topics of discussion given the myriad of topics commonly discussed in advisor meetings.

“What this suggests is that advisors potentially need to be more tactical in how they address these specific issues,” Blanchett writes in the report. “For example, some kind of checklist or materials directly addressing each of these key aspects of retirement may ensure that investors are getting the holistic retirement guidance the financial professional is striving for.”

Here are seven important service areas where there appear to be sizable gaps between advisors and their clients.

1. RMD Planning

A whopping 97% of advisors surveyed said they talked with their clients regularly about how to handle RMDs, but only 54% of investors working with financial professionals note discussing this with their advisor.

Not only is this one of the biggest gaps identified in the survey between advisors’ and clients’ perspectives, it’s also one of the most potentially damaging.

That’s because missed RMDs come with big penalties, and because waiting to make tax-deferred account withdrawals until RMDs kick in under the law is often a suboptimal strategy from a tax management perspective.

2. Retirement Lifestyles

While 70% of financial advisors say they frequently bring up how individuals will spend their time in retirement, only 29% of clients note their advisors frequently do this.

That’s a major gap, Blanchett warns, and its also an area where failing to do the planning legwork can result in poor retirement outcomes. Simply put, building a satisfying life in retirement requires more than having sufficient assets.

As other research has repeatedly shown, factors such as social connection and healthy habits also seem to matter a great deal to happy retirements. Financial advisors and their clients must account for the “where” and “why” as they build retirement plans.

3. Protected Income

While 97% of investors say wealth “protection” is moderately or very important in their vision for retirement, only 79% of financial professionals do.

4. Tax Minimization

The survey results show that nearly all advisors (95%) report delivering insights and planning on minimizing taxes in retirement, but fewer than two-thirds (64%) of clients report receiving support in this area.

Blanchett says such gaps suggest that, while advisors may be discussing these topics with clients, the clients are either not remembering the discussion (i.e., the advisor isn’t communicating effectively) or the discussion didn’t deliver the specific information clients feel they need.

5. Income Planning

The misalignment is smaller, but still significant), when building a general income plan.

One positive finding is that a high portion of both financial professionals and investors report discussing a retirement income plan. Specifically, 98% of financial professionals report doing this versus 85% of investors.

That’s one of the smallest gaps identified in the report, showing that advisors and clients seem to be more or less on the same page when it comes to the basics of retirement prep.

6. Monthly Budgeting

The survey results show that a smaller but still sizable proportion of advisors (84%) say they are speaking with their clients about budgeting the amount of money that will be needed each month during retirement. This compares with just 62% of clients who report getting guidance in this area.

While related to income planning, budgeting is a more granular activity that can help advisors and clients get a better sense of the anticipated lifestyle in retirement — especially when sources of lifetime income such as Social Security, pensions and annuities are considered.

Unfortunately, this is another area with a big gap, with 98% of advisors saying they discuss these topics and just 69% of clients reporting the same.

7. Withdrawal Strategies

Related to the gap reported with respect to RMDs, clients also report getting less advice on the topic of knowing which accounts they should draw retirement income from (and at which time) relative to what advisors say they are providing.

Specifically, nearly all (96%) advisors reporting speaking about this regularly with clients, but just 66% of clients agree.

“Overall, while this report suggests advisors are making progress, they still need to do a more effective job communicating with clients regarding retirement-related issues,” Blanchett concludes.