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Why more advisors are turning to a holistic retirement planning approach

Insurance Forums Staff

The Insured Retirement Institute (IRI) released a new report in late December forecasting that more advisors in the years ahead will embrace a holistic retirement planning approach — one focused on developing retirement income for clients.

In its annual State of the Insured Retirement Industry report, Washington, D.C.-based IRI finds strong demand for lifetime income based on demographics, increasing longevity and the demise of traditional pensions. The IRI report concludes that holistic retirement planning with a focus on income-generating strategies will help advisors address this demand while adding value to the client-advisor relationship.

“There has never been a greater demographic need for lifetime income strategies,” IRI President and CEO Cathy Weatherford said. “We’ve talked for years and years about how the Baby Boomers need to save for retirement. They are there now. Some 24 million Boomers are now 65 and older, and 33 million more will join them over the next seven years. The time has come to help them focus on the income that will support them throughout retirement. Developing holistic retirement plans, designed to generate lifetime income, will have an important part in helping them meet their needs and goals. Financial professionals who embrace a holistic approach will be well-positioned in today’s market as they demonstrate value to their clients.”

The report also discussed the impact of rising interest rates, as the retirement income industry heads into 2017. While still historically low, if rates can continue to increase at a gradual pace, the report suggests the market may respond by offering higher crediting rates on fixed annuities and more generous payouts on both fixed and variable products offering lifetime income. Should rates normalize, it will take some time to have an effect, so rising rates should be viewed as having a late-2017 impact on product design and/or sales.

On the public policy front, the IRI report focused on the Department of Labor’s Fiduciary Rule and its new requirements, most of which will be applicable on April 10, 2017.

The report states that while there has been speculation policymakers may take action on the rule, it is not clear whether the incoming Trump Administration or Congress will try to delay, modify or repeal the rule. The report also identified tax reform as potentially impacting the industry, as both President-elect Trump and the Republican-controlled Congress have both stated their intention to reform the tax code in 2017.

The IRI report stated that tax incentives for retirement savings are an important impetus for Americans to save and for employers to offer retirement plans. Changes to these incentives could therefore risk disrupting retirement savings.

Additional key findings from the report:

  • Promoting retirement savings and lifetime income: Public policy can greatly influence retirement savings and increase access to lifetime income strategies through workplace plans. IRI specifically identified the Retirement Savings and Enhancement Act, which would “provide clear rules to plan sponsors for including lifetime income products in workplace plans,” as legislation advancing these objectives. The legislation was unanimously approved by the Senate Finance Committee in September.
  • Product innovation: The retirement income industry continues to innovate, developing products to respond to the interest rate environment and to the changing regulatory landscape. Regarding the former, insurers expanded the use of managed volatility funds when offering lifetime income benefits with variable annuities. They also expanded the use of custom indexes with volatility-controlled overlays in fixed indexed annuities. In response to the regulatory landscape, the report finds that many companies began designing or expanded their lineup of fee-based products.
  • Financial stability: The report finds that the life and annuities industry is financially stable headed into 2017. The credit rating outlook is stable, reflecting strong balance sheet fundamentals and liquidity, as well as disciplined asset-liability matching and operating performance.
  • Economic engine: According to the IRI report, providers of retirement income products and services employ tens of thousands of professionals across the United States, contributing to economic growth as they work diligently to help Americans secure their futures.

Click HERE to access the full report.

About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of 40 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.



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