Slott urges advisers to embrace distribution strategies

NEW YORK — Financial advisers still haven’t begun taking the right steps toward helping clients earn an income in retirement, an industry leader said.

NEW YORK — Financial advisers still haven’t begun taking the right steps toward helping clients earn an income in retirement, an industry leader said.
Most advisers aren’t even talking with their clients about the distribution of assets, said Ed Slott, editor of Ed Slott’s IRA Advisor, a monthly newsletter based in Rockville Centre, N.Y. He made his comments as the keynote speaker last week at the 2007 InvestmentNews Retirement Income Summit here.
Mr. Slott estimated that just 1% of advisers address distribution while the rest are focused solely on helping clients accumulate assets.
If advisers fail to think about distribution and issues such as individual retirement account rollovers, they will lose clients, he said.
But another industry leader said that advisers need to continue to focus on helping their clients accumulate assets before they can switch to distribution.
The reason the industry may be slow in turning to distribution is because participants and consumers aren’t ready, Fred Reish, managing director of the law firm Reish Luftman Reicher & Cohen in Los Angeles, said during a panel discussion titled “Fiduciary Responsibility Issues in Retirement Planning.”
Automatic enrollment
Many advisers still are focused on trying to get individuals to increase their participation, he said. As automatic enrollment skyrockets in the next few years, advisers then can begin to focus on retirement income issues for their clients, Mr. Reish said.
Mr. Slott, however, thinks that advisers immediately need to start educating themselves about distribution. It is imperative that advisers show their value to clients so that they can capture IRA rollover money, he said.
Advisers, planners and attorneys can make egregious mistakes that cost clients thousands of dollars in taxes simply because of poor planning and decision-making, Mr. Slott said.
Therefore, advisers must set themselves apart from other professionals, be they attorneys or certified public accountants, he said.
For instance, if a client’s parent dies, the adviser is responsible for ensuring that the client pays the least amount of taxes on any IRAs they may inherit, Mr. Slott said.
“This game is won or lost in the second half of the game,” he said.
Even those advisers who have helped their clients accrue fantastic returns will be criticized by their clients if they cost them thousands of dollars in taxes once they are ready to retire, Mr. Slott added.
“All advisers look alike. If all you do is sell on price, you’ll work harder and harder till you drop dead,” Mr. Slott said.
“You need to bring something more to the table,” he said. “You need to bring more value.”
Other industry leaders said that advisers even need to look closely at fiduciary issues as they help clients prepare for an income during retirement.
With the issue of retirement income looming, there might be new fiduciary issues for advisers to consider, said Donald B. Trone, president of the Center for Fiduciary Studies and chief executive of Fiduciary360, both in Sewickley, Pa.
“I’m going to leave this conference and determine whether or not we need to define a fiduciary standard of care for retirement income,” said Mr. Trone, who spoke on the same panel as Mr. Reish.