For many financial advisors, helping clients retire comfortably is one of the most satisfying aspects of their job. They apply their unique expertise and knowledge to develop strategies to help clients to plan for their retirement and future.
Clients expect their retirement plan advisors to provide personalized guidance and recommendations, which can range from the commonplace—like 401(k) management—to lesser-known strategies like exploring the potential of how a life settlement can supplement retirement income.
In this blog, we’re looking at what, exactly, retirement plan advisors do in order to provide a few examples of retirement planning advisor life settlement use cases.
How Do Retirement Plan Advisors Get Paid?
Simply put, retirement plan advisors—like virtually any subset of the “financial advisor” category—earn their living by working to turn their clients’ retirement dreams into reality. They work to develop strategies that combine general financial best practices with innovative opportunities to diversify or supplement clients’ retirement income. By asking the right questions, a qualified advisor develops a firm understanding of their clients’ needs and priorities, and can provide recommendations for making the most of retirement.
What Are the Qualities of Top Retirement Plan Advisors?
Typically, the best financial advisors have a few characteristics in common, namely:
- They’re passionate about financial planning, wealth management, and creative problem solving.
- They’re able to not only engage in deeply analytical thinking, but they can also translate complex concepts into language their clients can comprehend.
- They’re excellent listeners, able to understand their clients’ unique expectations and objectives, priorities…even their fears and anxieties.
- They’re confident, effective communicators that are able to keep clients’ needs at the forefront and gain their clients’ trust.
- They’re able to tailor their recommendations to each client’s unique situation and needs.
What Percentage of Retirees Use a Financial Advisor?
According to an Employee Benefits Research Institute study, 38% of retirees consult a financial advisor for retirement planning advice. Outside of a certified financial advisor, retirees’ most common sources of financial advice are:
- Online resources (23%)
- Family and friends (21%)
Among adults who are either active workers or retirees, the same data shows that around 1 in 3 work with a financial advisor. However, 4 in 10 expect to in the future, meaning the data is trending toward working with qualified advisors.
For these numbers to keep trending upward, financial advisors need to help clients understand the myriad benefits of hiring a financial advisor and the full range of strategies involved in retirement planning.
Does a 401k Plan Need an Advisor?
As one of the most popular retirement plan types, retirement plan advisors know the ins and outs of how to make the most of their 401(k). While many clients’ employers will typically connect them with a dedicated point of contact for their plan, who can answer common questions, many opt to also solicit their financial advisor’s input. That way, any decisions regarding their retirement plan can be made within the context of the client’s larger financial picture.
What Is a Fiduciary for a Retirement Plan?
The IRS defines a fiduciary as someone “who owes a duty of care and trust to another and must act primarily for the benefit of the other in a particular activity.” In other words, a fiduciary is legally required to make recommendations based purely on maximizing their clients’ outcomes.
Are Retirement Plan Advisors Fiduciaries, and What Does a Fiduciary of a 401(k) Do?
Yes, a retirement plan advisor fulfills fiduciary duties by asking the right questions, listening to their clients, and helping them to make the best possible decisions. While a large subset of financial advisors also qualify as fiduciaries, that’s not always the case. For clients, one of the biggest benefits of working with a qualified fiduciary is that they can trust the advisor won’t be making any commissions based on their recommendations—whether they apply to a 401(k) or other strategies—which goes a long way toward building trust.
What Role Can a Life Settlement Play in Retirement Planning?
Ultimately, helping clients retire means exploring a wide variety of wealth management strategies in order to create a diversified portfolio for a comfortable retirement.
Among the tools at a savvy financial advisor’s disposal are life settlements, a specific type of transaction in which a client sells part, or all, of an unneeded or unwanted life insurance policy to an investor (who takes over the premiums and potential death benefit).
With a life settlement, clients will receive more value than they would if they were to just surrender their policy or stop paying premiums, for example. For clients who qualify, a life settlement can open up new possibilities for post-retirement life.
What kinds of clients should consider a life settlement? Who are life settlements best-suited for?
- Clients with unneeded or unwanted policies (convertible term life, whole life, universal life, and second to die policy types are all eligible).
- Clients whose policies have a death benefit of at least $100,000 and premiums that are less than 5% of their policy’s face value.
- Clients who are at least 70 years old (ideally, 75 or older), with a life expectancy of 15 years or less. Clients as young as 65 can qualify, in the case of a terminal condition.
At Life Settlement Advisors, we educate and empower our clients to make the best decisions possible for their future, including understanding how a life settlement can supplement or extend their retirement income. Get in touch to learn more about the process, so you can present your clients with every opportunity possible to maximize their post-retirement wealth.
I am always happy to answer any questions about these life-transforming transactions.
