Why Shy Away From Offering Advice?


If ever there were an opportunity for insurance producers and advisors in the individual market to grow their books of business, this would seem to be the time.

That opportunity lies in serving the financial advice needs of people when they retire from a defined contribution (DC) retirement savings plan, such as a 401(k) plan, at work.

Some agents and advisors shy away from this market, saying “We’ve heard it all before, but where is this great throng of retiring workers who want my advice?” Some say the retiring workers just leave their retirement savings in the employer plan or roll it into an individual retirement account made available through the plan.

A re-think might be in order. Fresh data from the LIMRA Secure Retirement Institute (LIMRA SRI) indicates that the large majority — 70 percent — of plan sponsors do not recommend a distribution option to DC plan participants when they retire.

That means a lot of American workers are retiring out of their DC plans with virtually no advice on what to do with their plan savings. If that’s not opportunity, it’s hard to figure out what is.

Most plans do have someone meet with retiring workers to go over their retirement benefits, according to Matthew Drinkwater, associate managing director at LIMRA SRI. For instance, 49 percent of plan sponsors say that someone from the company (such as human resources) does this, 40 percent say a plan provider rep does it and 15 percent say a plan advisor does it, Drinkwater told the annual Retirement Industry Conference in Chicago.

But those figures refer to education, not advice.

Employers have a laundry list of reasons why they don’t offer advice, and that could always change in the future under new regulatory regimes or market conditions. But right now, producers and advisors in the individual market appear to be the retiring boomers’ best option if they want some help with what to do with their retirement money.

Apparently, advice makes a difference in outcome. According to the study, 48 percent of individuals ages 55 to 70 who had discussed a plan rollover decision with someone else named the financial planner/advisor as the “individual who had the greatest influence on their decision.” Significantly, 53 percent of these assets were not retained by the plan provider, according to Drinkwater.

Bottom line: If 70 percent of plan participants are retiring without plan-related “advice,” it stands to reason that some of those people will be at a loss about what to do. Not all of them have sufficient assets to attract advice-minded agents and advisors, but some do. With baby boomers reaching age 65 every day, many with DC plan assets in tow, this market is ripe to expand. For that reason, advisors who currently do not offer advice services for this market might want to reconsider.



Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

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