As advisors know, the coronavirus pandemic created negative consequences when it comes to retirement planning for a broad swath of clients.
Whether it was the unnecessary attrition in the labor force, pandemic-fueled declines in equity markets in 2020 that otherwise wouldn’t have been an issue or money spent on education resources due to school closures, among other factors, the health crisis was punitive for clients’ retirement efforts.
The coronavirus pandemic altered investment regimes and there’s little indication things will return to “normal.” In fact, preparing for “the new normal” – overused as that phrase may be – is essential to improving client outcomes.
Still, for as bad the pandemic’s retirement impact is, there are other retirement disruptors advisors need to be aware of. Fortunately, those issues, which are outlined below, are easy for advisors to address.
These Disruptors Can Be Defeated
A new survey from Principal Financial Group underscores the point that advisors and clients will contend with multiple retirement potholes over the coming years.
“An aging workforce, Generation Z, the growing demand for personalized investment advice, and financial wellness are top of mind for more than 250 plan sponsors and 200 financial professionals that responded to the Principal® Future of Retirement Survey,” according to the survey. “Each are viewed as priorities in the next 5-7 years to help address the widening retirement gap that is approaching $4 trillion in the U.S.”
Not surprisingly, an area of emphasis for advisors is catering to the various demographic and generational retirement demands in the marketplace today. Said another way, one-size-fits-all approaches won’t cut and could send clients out the door.
“More of Gen Z will enter the labor market in the next 5-7 years while the number of people aged 75 and older in the workforce is expected to grow 96.6 percent by 2030,” adds Principal. “To support an aging workforce, three out of four plan sponsors and financial professionals agree participants should have the ability to make recurring withdrawals from their employer-sponsored retirement savings as they take a phased approach to retirement.”
In what could mark good news for astute advisors already focusing on bespoke and holistic services, those traits are likely to be increasingly coveted by more clients in the years ahead.
“One growing expectation to better serve participants is an ability to provide individualized advice. More than 70% of both plan sponsors and financial professionals agreed personalized investment portfolios and managed account services will be common offerings within defined contribution plans by 2030,” observes Principal.
Focus on Financial Wellness
Not surprisingly, emphasizing broader financial wellness, which takes many forms, is paramount to advisors’ success in terms of boosting clients’ retirement outcomes.
“Financial wellness programs are also expected to emerge as an additional plan resource to further personalize the participant experience by 2030, with 85% of plan sponsors and 90% of financial professionals agreeing plan sponsors will increase the adoption of them,” as noted in the survey.
Fortunately, there are specific, easy-to-address areas for advisors to drill down on with clients.
“Outside of retirement savings programs, plan sponsors believe the top five financial wellness benefits that should be offered include helping participants establish a budget and financial plan, retirement income planning, credit card and debt counseling, healthcare planning for early retirees, and investment education,” concludes the Future of Retirement Survey.
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