Communicating clearly and effectively with clients has always been a critical part of a financial advisor's role. With the Department of Labor's new fiduciary rule, advisors have even more reason to discuss the full range of retirement income options with their clients.
The rule, which will begin to take effect in April 2017 barring any changes by the next president, requires advisors to act in the best interests of their clients and to disclose any potential conflicts of interest. For investors, the rule makes investment choices more transparent and helps avoid unnecessary fees. For advisors, it offers an opportunity to have better, more holistic conversations that incorporate each client's goals, health and emotional well-being. Ultimately, these conversations allow advisors to create retirement plans that support clients' best interests and inspire their loyalty.
Start by talking with your clients about the following essential aspects of any retirement plan:
Almost 80% of Americans would feel better about retirement if they had a source of protected lifetime income, according to the 2016 Empower Retirement Lifetime Income Score. Many people use a protected income stream to cover basic living expenses, including housing, groceries, transportation, healthcare and utilities.
To help your clients determine if they have enough protected income, work with them to draw up a budget, keeping in mind that their expenses may shift over the course of their retirement. Then determine whether guaranteed sources of income like pensions and Social Security will be enough to cover their basic expenses. If they’re not, talk to your clients about purchasing a variable annuity with a guaranteed pay-out.
As your clients approach retirement, they may grow concerned that a sudden downturn in the market could throw a wrench in their plans. Such fears are natural, but the bigger risk is that they'll have to a pay for a longer retirement than they anticipated. Life expectancy is on the rise, and there is a one-in-four chance that one partner in a 65-year-old couple will live to age 98. Continuing to invest in stocks can help your clients stay ahead of inflation and maintain sufficient income for their entire lives.
Your clients’ biggest fear is likely the unknown—from how long they will live to what their health care costs may be. There may be unexpected opportunities along the way too, such as travel or funding a loved one's education. Check in with your clients regularly about how their plan is working for them, and make adjustments as you—and they—go along.
The DOL fiduciary rule provides an opportunity to strengthen relationships with your clients, and to gain a deeper understanding of their unique situations. By having frequent conversations that cover their physical, emotional and financial needs, you'll make sure that you continue to act in your clients' best interests—and strengthen your own practice as a result.
1 Empower Retirement, Lifetime Income Score, VI 2016 http://www.empower-institute.org/media/PDF/EmpowerInstitute_Lifetime_Income_Score_VI_2016.pdf
2 Any guarantees are based on the claims-paying ability of the issuing insurance company
3 Society of Actuaries, 2016
This material was prepared to support the promotion of insurance products underwritten by GWFS Equities, Inc., Member FINRA/SIPC and issued by Great-West Life & Annuity Insurance Company (GWL&A) or in New York, Great-West Life & Annuity Insurance Company of New York (GWL&A of NY). Any guarantees are subject to the claims-paying ability of the insurer and do not apply to the subaccounts. GWFS Equities, Inc. is a wholly owned subsidiary of GWL&A. GWL&A is not licensed to do business in New York. Contracts may not be available in all states.
Before purchasing a variable annuity, investors should carefully read the prospectus which contains an annuity’s investment objectives, risks, charges, expenses, and other information associated with the annuity and its investment options. You may obtain a prospectus for the annuity and its underlying funds by calling 877-723-8723. Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York do not offer or provide investment, fiduciary, financial, legal, or tax advice, or act in a fiduciary capacity, for any client unless explicitly described in writing. Please consult with your investment advisor, attorney and/or tax advisor as needed.
Variable annuities are long-term investments and may not be suitable for all investors. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59 ½. An investment in a variable annuity is subject to fluctuating values of the underlying investment options, and it entails risk, including the possible loss of principal. A withdrawal charge may also apply.
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