Estate of flux

In shifting their practices to meet the changing needs of baby boomers, advisers are preparing to help their clients set up more trusts.

Advisers are always challenged to change their business models to adjust to their clients, said David Diesslin, founder of Diesslin & Associates Inc. in Fort Worth, Texas. Right now, clients are demanding advice on estate plans, he said.

According to the seventh annual InvestmentNews Industry Attitudes survey, 73% of advisers envisioned creating more trusts as baby boomers begin to inherit wealth, up from 70% in last year’s survey.

“The reality is, as clients’ needs change, the services you provide change to service those clients. We’re certainly doing more with our clients with different issues and watching the estate-planning process,” said Mr. Diesslin, whose firm manages more than $500 million.

“We’re extremely deeply in-volved in estate planning,” he said. “It’s just the natural evolution of servicing your client and making sure it connects to the other dots in their life.”

Many baby boomer clients have begun to realize how important estate planning is, especially as they have had to oversee their parents’ estates, said Darin P. Pope, senior vice president and chief investment officer of United Atlantic Advisors LLC, a Secaucus, N.J., firm with $130 million under management.

“There will definitely be more setting up of trusts and estates in the future, and more attention to estate planning,” he said.

Meanwhile, 81.8% of survey respondents — up from 75.8% a year ago — said that with clients getting older and closer to retirement, they have already started shifting their practice from helping people accumulate wealth to helping with the distribution of their assets in retirement.

Thomas Clark, a chartered financial consultant with Compensation Designs LLC in West Des Moines, Iowa, said that he has seen a shift in retiree behavior over the years.

“It’s interesting because today’s 65-year-old is like the 50-year-old of 35 years ago. Today’s 65-year-old is active and traveling and difficult to track down,” Mr. Clark said.

“By the time they’re in their mid-70s, then I’m finding they’re becoming more conservative and more apprehensive about the future,” he said.

Even though advisers are setting the stage for more clients to retire, they are still torn on whether the industry needs new products for retirement distribution.

When advisers were asked to indicate, on a scale of 1 to 5, how important it is to create new products aimed at retirement income, with 1 being the least important and 5 being the most important, there was clear disagreement among the 220 respondents, with 17.3% giving it the lowest grade and 20.5% giving it the highest.

When wealth adviser Jim Parks, president of Parks Financial Management in North Haledon, N.J., began his practice, he was working mostly with retired clients.

He thinks that over the years, the industry has created adequate products.

“I think the strategies that meet these clients’ needs are a blend of withdrawing dividends from their current positions as well as doing systematic withdrawals from mutual fund portfolios,” said Mr. Parks, whose firm manages $152 million in assets. Of advisers who answered a question about how prepared their clients were for retirement, the largest segment — 37.6% — said that 61% to 80% of their clients were adequately prepared for retirement.

Mr. Pope also said that a large percentage of his clients are prepared, but added that advisers’ clients aren’t the best indication of the overall market.

“The people we see are people who know they need help. They’re smart and disciplined, and better than average,” he said.

“They’re smart enough to know what they don’t know,” Mr. Pope added.

Thomas F. Wallach, an adviser and the sole proprietor of Wallach Financial Planning in Chester, N.J., said his retired clients were more than adequately prepared.

“I have some clients who don’t even need to take money out of their retirement accounts yet,” he said.

Mr. Wallach declined to disclose his firm’s assets under management.

When asked how many of their clients were already in retirement, just 23.2% of survey respondents said that more than half their clients were already retired. Forty-two percent answered that between 21% and 50% of their clients were retired, and 27.3% said that 20% or less were.

About 60% of Mr. Parks’ clients are in retirement and about 15% plan to retire in the next five years.

Mr. Wallach said that just 14% of his clients are retired. He envisions that another 20% will retire in the next five years.

When survey respondents were asked how many of their clients would retire in the next five years, the largest segment — 45.6% — said they foresaw that 21% to 50% would retire within that time frame.

As advisers are changing their practices for their aging clients, another important issue is whether they have a succession plan for their office. When asked whether they had such a plan, slightly more than half of respondents said they did.

Gary Davis Jr., founder of Beneficial Concepts Group LLC in Stockton, N.J., oversees professional operations for advisers and envisions offering them more assistance on ways to craft a succession plan.

“This is a big issue in our industry, not only with baby boom clients coming into retirement but the tremendous amount of advisers who will be coming into retirement,” he said.

Lisa Shidler can be reached at [email protected].