section 1 - The American College Online Learning Center

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a. Problems with implementation are often tied to information that the planner doesnot know (for example, marital problems, health issues).b. The planning process stirs up a lot of issues that may have to be addressed.c. If the client is too “hands on” during the process, he or she may not be “buyinginto” the plan or there may be a lack of trust.d. If implementation is seen by the clients as being driven by the advisor, they mayresist the process.e. Sometimes the issues that get in the way of implementation can be predicted atthe beginning of the process if you are asking the right questions.6. Monitoring the retirement income plan (Video: Monitoring the retirement income plan:Littell, Tacchino, Kitces, Guyton)a. The consequences of change in retirement are more serious because there arefewer options to resolve the problem.b. This means paying close attention and reacting more quickly to issues that arisethan in other life stages.c. The client views monitoring as “am I still okay?”d. The time frame is shorter and the impact of change is larger, meaning that there isa lot of responsibility on the advisor.e. There can be disconnects between the advisor’s goal of making sure that the clientis going to have sufficient resources and the client’s willingness to accept change.f. How often do you stay in touch with the clients?(1) Two annual meetings(2) Four written quarterly reports(3) Four to six other touch points (newsletters and other notices of currentevents)g. There is some annual planning required (specifically tax planning).h. Clients also need to monitor the advisor as well.LO 7-3-2: Ensuring client participation in the retirement income plan1. Findings from behavioral finance that affect how financial advisors work with their clients(Video: Ensuring client participation in the retirement income plan: Littell, Jordan)a. The way people make financial decisions has never changed. However, today weare beginning to have a better understanding of that process through behavioralfinance research.b. We understand that we have to consider not just knowledge, but also how peoplefeel about a decision.c. We need to frame the conversation around income — and not about assets.d. Successfully working with clients requires managing clients’ expectations. It is notpossible to have control over market conditions. Also, many will face a shortfallin retirement and they need help (maybe some tough love) to appreciate thesituation.2. How do we translate this information into practical ways of working with clients?a. Clients want a process, not a product.b. Questions need to be devised that elicit feelings as well as facts.c. The clients needs to feel that the solution matches their needs.3. MetLife income analyzer tool7.26
a. Sample questions to identify how a client feels about the importance of guaranteesunderstanding that the trade-off is flexibility(1) I prefer a predictable retirement income check each month, like a regularpaycheck, in exchange for giving up some of my ability to take moreincome when I may need it. (agree/disagree)(2) I do not want to worry about the ups and downs of the market after I retireand the effect on my income, even though I may miss out on opportunitiesto increase my income level if the market goes up. (agree/disagree)(3) I am much less concerned with how long my retirement funds last andmuch more concerned with living my desired lifestyle in my earlierretirement years. (agree/disagree)(4) It is important for a large portion of the income generated from this accountto last my entire lifetime. (agree/disagree)(5) I would be comfortable giving up access to this money in order to receivethe most income possible. (agree/disagree)b. Note how these questions are framed(1) The focus is on income, not asset value.(2) Each question states something positive about guaranteed lifetime incomeor control and flexibility over one’s retirement savings. Then the questiongoes on to point out the trade-off that comes with that positive attribute.(3) Looking for a “gut” reaction by only offering the “agree” or “disagree” choice(4) Also consider internal conflicts with their decision by asking the same thingwith different framing (question 1 and question 5).4. Feeding back the results to the clienta. Take the results from the questionnaire and put it in the framework of a retirementincome mind-set.b. Example: For the individual who wants a balanced approach (between guaranteesand flexibility), the advisor asks whether the following represents how the clientfeels. “Your answers show that you value flexibility and guarantees of your money.You are willing to give up some control for a predictable income stream. Youwould also like to be somewhat involved in the management of your investments.Based on your answers, the combination of investment options that may be mostappropriate for you would include balanced amounts of various withdrawal optionsand lifetime income guarantees.”5. Take the client’s solution and offer products that fit that solution.a. Based on the client’s profile, offer a combination of products that may includeinvestment, deferred annuity with an income rider, immediate annuity, andlongevity insurance.b. Clients and advisors may resist immediate life annuities as part of the solution intoday’s low interest environment.(1) Immediate life annuities offer guaranteed income protecting against thedownside risk.(2) Without on inflation rider, they do retain exposure to inflation risk.(3) As compared to other fixed income investments today, they do give peoplethe opportunity to have a much higher sustainable payout rate.7.27
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Huebner School SeriesHS 353 STUDY O
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THEAMERICANCOLLEGE.EDUThrough The A
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c. But it is more comprehensive bec
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(3) Work part-time during retiremen
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SECTION 2: UNDERSTANDING RETIREMENT
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d. Solutions(1) The model considers
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. Other sources of retirement incom
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c. Another option for solving cash
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(b) Net worth statements that ident
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d. Be ready to reengage with the cl
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(b) In financial planning(c) In inv
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j. Planning Point: Planners can use
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e. We also need them to have a bett
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Assignment 2IDENTIFY RETIREMENT INC
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(2) Income4. Determining risk toler
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collaborative experience which focu
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6. Asset allocation and risk tolera
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c. How long will the income last?d.
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. Durationc. Reliabilityd. Other6.
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c. Supplemental Security Income (SS
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. An unused emergency fund can supp
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5. Inflation(2) The expense method
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Assignment 3CHOOSE APPROPRIATE STRA
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. Save as a percentage of income an
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(1) Note that 38% of second income
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(4) The AARP website has a national
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4. Contributions to IRAs and Roth I
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carve out the nondeductible contrib
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(2) Plus salary deferrals (for an i
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a. Example:(1) Save $10,000 in 25%
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(a) This requires knowing four fact
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. Solution(1) Li and Lin Lin are bo
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(1) The increase in dollar amounts
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9. In some circumstances, an indivi
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2. Reverse mortgage basicsa. Almost
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5. Planning considerations(b) Keep
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(2) Some funds that are promoted as
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(1) Berstresser, Chalmers, and Tufa
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RESOURCES FOR COMPETENCY 3: CHOOSE
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(2) From the previous employer(s) p
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8. IRA funded plans (IRAs, SEPs, SI
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. Does the distribution election fi
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6. Net unrealized appreciation rule
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a. Tax-exempt plans include Roth IR
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8. Calculating required distributio
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(2) Exception: If there are separat
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5. Impactc. Tax rates are low in ea
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(7) Based on ordering rules, identi
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7. A married couple who file jointl
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(1) Needed to provide the appropria
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13. Transfers at deatha. Wills(2) A
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(1) The Retirement Equity Act manda
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(2) Beneficiary designation of bene
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13. Overview14. Types(2) The donor
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(1) Charity needs only to payout in
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c. Access should be granted to an a
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nightmare of living probate might h
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(6) Powers to represent their princ
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c. If the policy is term coverage w
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e. Factoring personal and family he
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problem. On the other hand, we can
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d. Adding a cost of living adjustme
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g. Planning Point: Sometimes a high
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(2) Clients may not be able to “a
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c. Ensure that the client is receiv
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a. Example: Because of physical and
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options about where to get his/her
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(2) Facilities, monthly fees, and s
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8. Other strategies that help to co
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standard deviations of the returns
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a collapse in the real estate marke
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a. In a later competency we will di
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years of service with the employer)
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a. Planning Point: Planners should
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(2) If you have locked in food, ren
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(4) Loss-of-spouse risk—Deferred
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(1) Excess withdrawal risk—The us
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(5) Frailty risk—Managing assets
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7. Practice good career management:
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Assignment 6CHOOSE APPROPRIATE STRA
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Page 224 and 225: (b) A traditional fund company(c) A
Page 226 and 227: d. Evelyn is in great health and he
Page 228: RESOURCES FOR COMPETENCY 7: INTEGRA
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