BOSTON (MainStreet) -- Heading into 2012, one can only hope that the economy improves and retirement plans continue to recover.
But whatever good news, bad news and curveballs the next 12 months bring, we offer the following 10 resolutions we hope folks who earn their living providing retirement services will consider making:
1. We'll say enough already with the golf courses and beaches.
For 2012, we urge a resolution that retirement marketing focus more on the reasonable dreams of real people, not the flights of fancy wealthier clients may harbor.
A good chunk of retirement-related advertisements, Web sites and brochures continue to focus on dreams rather than reality.
An often repeated TV commercial for Schwab (SCHW) - Get Report mocks the idea of "owning a vineyard" as a golden age goal. That campaign is spot on. It wasn't that long ago that a fantasy life in later years was the carrot that led folks to seriously consider saving more, but post-recession, survey after survey is showing that the public cares more about comfort and maintaining their present lifestyle rather than leaping into some new, exotic or expensive chapter of life.
(SCHW) - Get ReportT. Rowe Price (TROW) - Get Report earlier this year unveiled a strategy it calls the "practice retirement." Its advice: Have fun while you are still working and, therefore, still have the income to offset the costs of travel, hobbies and major purchases. A momentary retreat from fastidious saving late in life won't hurt your prospects much, and could actually help get some initial spending out of the way.
(SCHW) - Get Report (TROW) - Get Report That approach may very well reveal that what seems like a great idea for retirement living doesn't always pan out. One adviser tells us of a client who had been saving up to buy post-retirement property at a golf resort. A few weeks into retirement, he abandoned that plan because after daily rounds of golf he was reminded, once again, of how bad he is at it and how much he can hate the game. He discovered, in the nick of time, that fantasy isn't always reality.
For the new year, we would like to see retirement messaging that, while not ignoring the reality of our bleak savings situation, doesn't hammer us over the head with the message.
(SCHW) - Get Report (TROW) - Get Report For most of 2011 (and the year prior), there was rarely a week without a press release, study or analysis sent our way sounding the clanging chimes of doom. Americans don't save enough! They need $1 million to retire! No, Make that $3 million! Maybe $4 million! We're all doomed, doomed, I tell ya!
(SCHW) - Get Report (TROW) - Get Report We would certainly not advocate sticking our collective head in the sand. Yes, Americans are, on the whole, woefully underprepared for retirement. A casualty of the death of the pension system is that about one-third of all Americans will probably rely on Social Security as their only real form of retirement income; for about two-thirds it will be their largest source of money as they age.
(SCHW) - Get Report (TROW) - Get Report So don't ignore the problem, by any means. But retirement professionals need to add a few wrinkles to the discussion. Too much negativity doesn't always spur folks to action. They may just throw their hands in the air and give up or ignore advice because they suspect an ulterior motive as the very people who profit from them saving more are the ones who are demanding they do so.
We suggest that the industry resolves to advance the solid efforts made to educate consumers about retirement basics, investment options, post-retirement tax considerations, insurance products, portfolio construction, long-term care planning and draw-down strategies.
(SCHW) - Get Report (TROW) - Get Report A promising development in recent years, fueled by the Internet and social media, is that retirement-focused companies -- as well as individual advisers -- have upped the ante when it comes to resources. A few clicks of a mouse is pretty much all it takes to find detailed, easy-to-follow guidance on financial matters.
(SCHW) - Get Report (TROW) - Get Report Far too many people, however, still don't grasp the fundamentals of their retirement plan and, instead, either cling to target date funds or tinker with portfolio lineups like they are infielders in fantasy baseball.
(SCHW) - Get Report (TROW) - Get Report According to a survey by the ING (ING) - Get Report Retirement Research Institute, almost half (47%) of respondents expect their employer to do more to educate them about retirement options. (And these folks may need to make a resolution to actually get the help they seek. Only 28% were working with a financial professional.)
David Littell, a professor at The American College and co-director of the New York Life Center for Retirement Income, suggests that advisers should "broaden their own education" as well.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report "There is a concern that people sometimes only bring to the table the solutions they are familiar with," he says. "We need securities brokers to understand annuity options for retirees. Insurance people need to understand the reasons who you might want to have a diversified portfolio in retirement, not just all annuities ... We need advisers to be better educated so they can be more comprehensive planners."
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report "If you are going to work with retirees you need to understand Social Security options," he continues. "You need to understand Medicare options, you need to understand supplemental Medicare insurance to help people with relocation decisions. Middle-income people have two-thirds of their wealth in home equity, so we need advisers to understand reverse mortgages. If you are essentially the quarterback of all this you need to be able to identify the issues."
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report The college and the New York Life-sponsored center are designing a retirement income designation for advisers that is planning focused, he says.
The retirement world needs to do whatever it can to combat post-recession malaise. Creative approaches could help reverse the trend of pre-retirees being their own worst enemy.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report Even though 2011 saw high unemployment, shrinking home prices and stock market volatility, 80% of Americans said that they will not focus on financial planning in their resolutions for 2012, according to a survey from Allianz Life Insurance Co. of North America (ADE) . It describes this lack of financial focus as "at the highest level in the survey's three-year history, exceeding the 67% of Americans who ignored financial planning when making resolutions in both 2009 and 2010."
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) The main reason for leaving financial planning out of resolutions, according to the Allianz respondents, was the belief that they "don't make enough to worry about it" (35%), while 23% said that they already "have a solid financial plan" and 17% attributed it to the fact that they "don't have an adviser/financial professional."
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) When asked if, given economic conditions and their current financial situation, they were more or less likely to seek the advice of a financial adviser or professional, nearly one-third said they were less likely. Only 20% indicated they were more likely and 49% said they're "unsure."
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) "Everyone, regardless of income level, needs to make financial planning a priority," said Katie Libbe, Allianz's vice president of consumer insights. "Whether you do it yourself, through a range of free and inexpensive tools online or seek the help of a financial professional, the last few years have taught us that we must prepare for uncertainty and risk. It's troubling to see that despite all of 2011's economic volatility, Americans are placing less emphasis on addressing their financial security."
Advisers, plan sponsors and the firms they work with need to focus on empowering the public to gain greater control over their assets.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) Rather than just focusing on one slice of the retirement pie -- a 401(k), for example -- savers need to be better prepared to use a full menu of assets (IRAs, Roth IRAs, bank accounts, CDs, brokerage accounts, etc.)
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) "Make sure to inventory and control all assets so they are being maximized," the Allianz study suggests. "Having 'idle' or 'orphaned' retirement savings accounts is not an efficient way to achieve financial goals. Evaluate rollover and IRA consolidation options, which can generally help to lower custodian fees, enhance portfolio management, reduce paperwork and improve beneficiary designation planning."
For years, the movers and shakers of the retirement world have focused on building up assets with not nearly as much guidance for how to spend down what they have accumulated and the best strategies to ensure that their nest egg lasts a lifetime. Perhaps more importantly, a push is on to have pre-retirees visualize their later years and quantify what it will take to maintain that lifestyle.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) "All the data about retirement planning and the psychological aspect is that it is very difficult to plan unless you can picture what your life is going to look like," Littell says. "We are starting to move away from the money a little bit and get people to picture what it is they're going to be doing in retirement, and that maybe will help them ... that is a very good trend."
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) "A message the industry has to get out is just the simple idea that it is impossible to fix your financial problems when you are 90 and no longer working," he adds. "I don't think people have that idea firmly in their heads."
Littell urges the industry to focus more on younger generations in the year ahead.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) "Before we were thinking about accumulation, now we are thinking more about retirement income," he says. "I wonder if, even for younger people, the conversation should shift to this idea of retirement income. If I'm 25 years old and I have a job making $50,000 a year, saying that I need $2 million in retirement -- it is hard to capture the imagination of what that means."
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) "We focus on this number," he adds. "It would be much more tangible to say, 'When you retire, you have to replace that $50,000 of income. If you did it with assets you'd probably need a million-and-a-half dollars, but if you went to work as a public school teacher and had a much better pension plan then that's going to be how you do it. So retirement income planning actually starts with the jobs you choose early on . I'd like to see the whole conversation shift from this whole accumulation issue to what I think it is more tangible."
There are plenty of folks who abandon their workplace 401(k) for an IRA because don't like the investment options.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) It wasn't so long ago that 30 or more investment options might be available within a plan, but today that number has dwindled to a handful.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) The logic behind the shrinkage wasn't malicious or to force folks into cookie-cutter portfolios. A very real concern was that too many options would confuse the average employee, leading to a sort of paralysis by over-analysis. Unfortunately, we may have veered too far in the other direction, limiting investors and guiding most into target date funds.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) We wouldn't want to see a return to the wild west, but might plan sponsors and the firms they contract with find some way to offer some additional options for those experienced, well-versed folks one might refer to as "power users"?
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) In any event, we'd hope companies look out for their employees and demand greater variety and transparency in the year ahead. Participants deserve the ability to keep fees reasonable. We are well aware that doing so might seem "dangerous," but would it really be so bad to offer better options for alternative assets, especially when some have been among the only consistent bright spots for investors in recent months?
The financial services industry took a hit to its reputation during the recession, and it will take more time to regain fully the trust of angry clients.
(SCHW) - Get Report (TROW) - Get Report (ING) - Get Report (ADE) To help themselves, anyone who works with investors needs to resolve a more open approach with clients in the year ahead. Be more easily available, experiment with instant messaging and webcam chats, be even more willing to meet whenever and wherever a client needs you.
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