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Financial Planners Say Retirement Income Market Will Grow Slowly, According To a New Study by the Financial Planning Association

Survey Says Financial Planners Seek More Retirement-Income Tools and Education

June 5, 2006, Denver, CO — The majority of financial planners believe that the retirement income market will grow substantially, but at a slow pace, according to a new study on financial planners’ attitudes and perceptions about the retirement income distribution market. The study found that while financial planners think the retirement income market will grow one client at a time, they agree it is an important part of their overall business. These are some of the findings from a recent study of the retirement income distribution market by the Financial Planning Association® (FPA®).

The study, 2006 FPA Financial Advisors’ Attitudes and Perceptions about the Retirement Income Distribution Market, sponsored by OppenheimerFunds Inc. and produced by The Diversified Services Group, Inc. (DSG), found that financial planners might need to reconsider their current business model in order to meet the needs of the growing and diverse aging population. Financial service companies can support planners’ work in this area by continuing to develop sophisticated planning tools and services.

"Extended life expectancies, a greater number of variables to manage, and difficulties in communicating with older clients, make for a much more protracted and complicated planning and monitoring process for financial planners," said Bob Vickery of DSG. "The situation has the potential to grow worse over the next 10 years as the demand for retirement income and distribution services continues to increase and compliance requirements are likely to become even more onerous."

Vickery also said, "These solutions and products are already an important part of financial planners’ portfolio of services. Driven by consumers and their clients’ needs, planners say that offering retirement income solutions is crucial to the success of their businesses."

"Regardless of the pace of growth, retirement continues to evolve into a more and more complex financial planning issue," said Kathleen Beichert, Senior Vice President of Retirement Plans at OppenheimerFunds, Inc. "Our retirement planning tools and services help financial planners address retirement needs one client at a time."

"FPA is the leader in helping financial planners succeed and better understand the needs of Americans who are faced with producing income in retirement. FPA also helps those firms that support financial planners create and deliver the retirement-income tools and education needed to serve investors," said Daniel B. Moisand, CFP®, president of FPA. "This study demonstrates our and OppenheimerFunds’ commitment to making sure America doesn’t outlive its assets."

Other key findings:

Systematic withdrawal strategies and dividend-paying investments are by far the most commonly recommended retirement income solutions.
Specific income-generating products such as annuities and Certificates of Deposits (CDs) are recommended far less frequently
Sixty percent of the planners surveyed have recommended reverse mortgage products at some point, however, only 6 percent recommend them often.
Seventy-five percent of those surveyed use some type of retirement income planning software program. Two-thirds of these programs are modified accumulation programs or were designed by the planners themselves.
Respondents typically rely on existing clients to fuel their retirement income business. It appears that this group waits for their clients to reach retirement age and/or leverages their existing relationships for referrals.
"While existing clients and referrals are always a good way to target this market, there is a real opportunity for planners to reach out to others who need help with retirement planning," said Beichert. "Planners should look for ways to partner with financial services companies and expand their retirement income client base."

The study also contains implications for providers of products and services to financial planners. "Financial services companies, financial planners, and technology vendors must develop more sophisticated planning tools that segment clients and provide them with credible, justifiable, tailored solution sets that are simple in concept, but adaptable to a variety of financial needs during the early and late retirement life stages," added Vickery.

An executive summary of the study will be distributed to FPA members this summer and the full study will be available for $3,750 for FPA institutional members in June. In addition, FPA will publish articles developed around the study’s top findings in its Solutions magazine and other publications.

For further information, contact:

Wm. Borden Ayers, Principal

Ph: 610-989-1710, ext. 21
Fax: 610-989-1730
e-mail: bordena@dsg-network.com

Diversified Services Group, Inc.
303 West Lancaster Avenue, Ste 2E
Wayne, PA 19087-3938