Page 47 - Investment Advisor June 2021

algorithms, intellectual property and money be pulled from Roth IRAs or assets,” he says. After all, “people want
economic strategies to extend the lon- taxable accounts? When should a cli- to get paid for their time. You have to
gevity of portfolios. For 30 years, he ent claim Social Security or take their pay more for decumulation advice than
has been training students and advisors pension early? Should a 401(k) be rolled accumulation advice. So prepare clients
alike on new ideas, new directions and into an IRA or be kept in the plan? What who have become accustomed to pay-
new products in the retirement, and about annuities? ing very little for accumulation advice,
decumulation, arena. that decumulation advice is a lot more
4% RULE IS A GOOD START expensive. … That’s why you don’t want
RETIREMENT PLANNING VS. For decumulation, advisors need “a to call it retirement planning.”
DECUMULATION powerful, robust dashboard to help This also means, he adds, that robo-
Drawing down wealth and retiring from them with this complex problem; it’s advisors will face challenges in this
the workforce are two dif- phase as decumulation has to
ferent events that take place Decumulation, for its part, is be more tailored and unique
simultaneously, Milevsky to the individual. “So I’m
explains. Economists have a mathematical problem — preparing the masses as they
finally realized two things: a process far more complex age,” he says. “It’s going to be
People don’t necessarily retire more expensive to get guid-
all at once, and many people than the process of saving ance, and rightfully so.”
“don’t hate work as much
as economists might think, and investing for retirement, WATCH INTEREST RATES
because some of us derive We also asked the finance
social engagement from it,” he Milevsky says. professor what he thought
told Investment Advisor. “We about the aging bull market.
like seeing people outside our family, as no different than building portfolios,” “Nothing shocks me anymore,” he said
COVID has taught us, and we actually Milevsky explains. of stocks’ recent trajectory, but he did
like what we do.” In the old days, he says, brokers recommend that advisors keep their eye
In short, decision-making on how would recommend stocks. Then they on long-term interest rates.
and when to retire is a “a sociologi- realized they couldn’t build portfolios “Interest rates are at such low levels
cal/psychological problem” that is one stock at a time so began to study and all assets are appreciating because
more complicated than it might seem. asset classes, correlation structures income is becoming more expensive,”
A financial advisor, particularly a young and historical returns as they moved to he said. “If you’re looking for a predic-
one, trying to counsel a retiree on life- asset allocation. tion, keep your eye on the long-term
style issues may come off as “vacuous,” “It’s become a much more quantita- bond market. That’s going to become
Milevsky says. tive and certainly a much more sophis- the bellwether. When long-term inter-
Instead, he says, advisors need to ticated process,” he said. He points est rates start to head up, that’s not good
“stick to their knitting” and “draw a out that the 4% withdrawal rule “is a for a lot of things, which is why the Fed
line around what they have expertise great conversation starter” and a good is working so hard to keep that number
in and get better at that, and vice versa. way to educate a client. But it doesn’t down. If six months from now we’re still
[They should] partner with profession- stop there. at 2%, 1.5%, then yeah, this bull market
als in related fields to deal with these will continue. But if suddenly that num-
other fields.” CHARGE MORE FOR ber increases quickly, then I’ll become
Decumulation, for its part, is a math- DECUMULATION ADVICE very bearish.”
ematical problem — a process far more “[Decumulation is] an expensive and
complex than the process of saving and elaborate process,” he explains. “It takes Washington Bureau Chief Melanie Waddell
investing for retirement, he says — it’s time. It’s more complex, time consum- can be reached at [email protected]. Janet
“the process of figuring out how much ing, and who is going to compensate the Levaux is editor-in-chief of Investment
to take out of my accounts every year financial advisor for this time-consum- Advisor. She can be reached at jlevaux@
and which accounts I should take them ing process?” alm.com. Ginger Szala is managing editor
from in the most tax-efficient manner.” The answer isn’t “a minimum trail fee of Investment Advisor Group. She can be
This has several facets: Should the or [being] paid on some small fraction of reached at [email protected].

JUNE 2021 INVESTMENT ADVISOR 45