Data & Research February 17, 2007

Retirement Coaches “Suiting Up″

As the nation’s workforce ages, a new study suggests that one in five advisers are already positioning themselves as “retirement coaches.″
Reported by
The national survey of Registered investment advisors (RIAs), released by Rydex AdvisorBenchmarking, Inc, also indicates that just over half (51%) of advisors are developing tools and resources to assess clients’ retirement readiness and identifying areas where they need additional support.
Looking ahead to the future, 26% are seeking to build strong relationships with the children of their clients and 24% are seeking to become retirement experts by taking educational seminars and courses. Seventeen percent are partnering with other professionals who offer services to pre-retirees.
Work Ahead
They have some work to do, however. While the advisers surveyed feel well-equipped to handle the investment side of the retirement equation, they’re not so prepared in the non-investment areas. For example, most ranked themselves as well-equipped in the areas of wealth retention (64%) and income-related investments (64%), while 48% claimed to have adequate knowledge of retiree health care issues (48%) and retiree living arrangements (50%). About one third of advisors are planning to increase their expertise in these areas (28% health care and 34% living arrangements). Still, 17% who admit they do not have familiarity with retiree health care issues do not plan to enhance their understanding of this topic, while 10% of advisors felt the same way about retiree living arrangements.
Maya Ivanova, research analyst for Rydex AdvisorBenchmarking, Inc., noted that, “Retirement is no longer just an investment equation for advisors. To truly be a ‘retirement coach,’ as nearly one fourth of advisors are striving to do, advisors will need to provide their retiree and soon-to-retire clients with comprehensive solutions and advice — beyond just investments. Those advisors who can provide a total package to their clients will differentiate themselves in the market and be more successful than their counterparts who don’t.”
Alternatives Eyed
RIAs surveyed also plan to ramp up their use of alternative investments (such as hedge funds, real estate, commodities, currencies and managed futures) in the next five years, according to a the survey. While many advisor respondents (42%) have moderately increased their use of alternative investments (0 to 25% in the past five years), another quarter (24%) have increased their use of alternatives by more than 100%. Advisors largely attribute the increased interest in alternative investments to their desire to access alternative investment strategies and pursue alternative returns, according to a press release regarding the survey.
The survey also noted that: 55% of advisers estimate that they will increase their use of alternative investments up to 25%, while 13% believe they will increase their use of alternatives by more than 75%.
According to the survey, advisers have turned to alternative investments for a variety of reasons:
  • 40% – different investment techniques
  • 38% – seeking absolute returns
  • 29% – filling portfolio allocations
  • 28% – addressing portfolio correlations, and
  • 25% – seeking unique vehicle structures
In the next five years, 24% of advisers believe that the alternative investments with the greatest business growth potential are capital protected and structured products, including commodities, while real estate (16%), private equity/venture capital (15%) and hedge funds (13%). About one fourth (24%) of advisers believe that alternatives will become more important than traditional investments, but nearly half (49%) believe that alternative investments will not become as important.
Client objections to investing in alternative investments cited include:
  • 51% – a lack of understanding
  • 27% – lack of liquidity
  • 27% – lack of clarity in how an alternative strategy works in the overall portfolio
The supplemental annual Rydex AdvisorBenchmarking Study was conducted online with 333 RIAs in November 2006. More information is available at http://www.advisorbenchmarking.com/

«