Advisors may be considering bowing out from serving small investors, thanks to the Department of Labor’s new fiduciary rule. In a study conducted by the LIMRA Secure Retirement Institute, when asked about the potential impact of the fiduciary rule the majority of advisors—55 percent—said that it will likely deter them from serving small investors; half say they will stop handling small rollover business.
“We are also concerned that the new DOL fiduciary rule may have a negative effect on advisors’ willingness to recommend guaranteed lifetime income products to their middle income clients,” Jafor Iqbal, assistant vice president, LIMRA Secure Retirement Institute, said in a press release about the results from the 2016 Advisor Survey on the organization's site.
That comes at a time when half of all financial advisors say the majority of their business consists of preretiree and retiree financial planning—almost 40 percent higher than in 2011.
In particular, the number of advisors offering Social Security claiming strategies has more than doubled (33 percent in 2011 vs. 70 percent in 2016).
In addition, required minimum distribution (RMD) planning, long-term care, sequence of withdrawal planning and defined benefit pension claiming strategies all saw double-digit growth over the last five years. Overall, 8 in 10 advisors say they are spending more time on retirement income planning.
When it comes to those guaranteed lifetime income products, advisors recommend on average that their clients invest between a quarter and a third of their portfolio in such a way. But while 9 in 10 advisors agree that guaranteed lifetime income products provide clients “peace of mind” in retirement and feel it is important to own them, there’s resistance to using such products in a clients’ portfolio, because they offer less flexibility than other options.
Nearly 4 in 10 advisors say that guaranteed lifetime income products compromise their ability to manage a clients’ portfolio as circumstances change.
Prior Institute research has indicated that 9 in 10 U.S. middle market households (assets between $100,000–$249,000) have assets in a defined contribution plan or an IRA and the majority of them expect to rely on those assets to fund their retirement.
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