Do you know as much about retirement distribution planning as your clients and prospects? You'd better hope so. If not, you will lose those clients; maybe not now, but very soon.
Consumers are getting smarter. In recent seminars I've conducted, they have been asking me better and tougher questions about taking money out of their retirement plans and individual retirement accounts. They want advisers with answers.
That represents an opportunity, because if you can do the distribution planning your clients desperately need, you are in the best possible position to increase your business. The key is to begin providing these services before your clients move their retirement money to a more knowledgeable adviser.
By retirement distribution planning, I mean the creation of both lifetime income and post-death estate plans for your clients' retirement savings. Selling products alone does not mean that you are an adviser doing planning. Consumers don't want salesmen; they want educated advisers who can do real tax and estate planning for their IRAs — which are the final destination for their retirement savings and the repository of most of their wealth.
More money than ever is flowing into IRAs from 401(k)s and other company plans and this is just the tip of the coming retirement tsunami. This trend will continue for at least the next 15 years or more as 78 million baby boomers start realizing that they need to work with advisers to shield their retirement funds from huge tax hits. Remember that these funds have not yet been taxed and an exit strategy is needed to minimize or eliminate the tax burden. It is now not uncommon for a client's retirement account to be their largest single asset and the one they will focus their planning on for the rest of their lives.
Advisers who know the IRA distribution tax rules will own the market. It's already happening, and smart advisers are seeing the results in a growing bottom line.
Do you do this kind of planning? Educated advisers are in the best possible place at the best possible time when it comes to attracting the largest IRA rollovers. They are in great demand because clients are getting educated and are moving big chunks of money from financial salesmen to financial advisers.
The boomers are far more demanding of advisers than their parents. Thirty years ago, financial advisers, as we know them today, didn't really exist. There were certified public accountants and attorneys, but no one who looked at the big picture. Then again, no one had IRAs or 401(k) plans 30 years ago. Retirees had pensions and investments, for which they used brokers to buy and sell stocks.
That has all changed. For ever-growing numbers of people, the pendulum has swung from accumulation to distribution.
Advisers who do tax and estate planning in the distribution phase are attracting the large retirement assets. This trend is still in the early-adopters stage, but in a year or two will explode to the point where all retirement money will flow to advisers who are true planners and away from old-style advisers who focus on selling products.
The clients you want — the ones with money — already have money. They are past the point of being concerned with investment returns. Their new concern is having their money last as long as they do and not be decimated by taxes.
Professional education is your best asset and opportunity. It's the education and the true planning ability that is attracting the largest IRAs.
And if you can't offer educated advice, boomers will seek it elsewhere. The Internet provides incredible access to information, and boomers are not afraid to find answers on their own. Once informed, they are likely to test and question their advisers. What they want, therefore, are thorough conversations with knowledgeable advisers who can answer their questions and provide intelligent solutions.
If you can't provide the answers, watch out. Boomers are not as loyal to advisers as their parents, and are much more likely to move their life savings from an adviser they've used for 30 years to a new adviser who can give them what they need.
Now is the time to take advantage of this great migration of retirement savings to advisers who have specialized knowledge in distribution planning. Ignore the trend at your own peril.
Ed Slott, a certified public accountant in Rockville Centre, N.Y., also has created The IRA Leadership Program and Ed Slott's Elite IRA Advisor Group to help financial advisers and insurance companies become recognized leaders in the IRA marketplace. He can be reached at irahelp.com.
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