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The reality facing today's workforce is that “social security will not, nor was it intended to, constitute the entirety of U.S. workers' retirement income.1” This underscores the importance of personal financial responsibility and the role the individual plays in planning for their future financial well-being. Workers face a multitude of problems when asked to make all kinds of decisions, both simple and complex regarding saving for their retirement – and that’s where Behavioral Economics come in.
Beginning in April 2017, a new Department of Labor rule goes into effect, changing how a fiduciary is defined. The rule aims at ensuring advisors put their clients’ best interests first (instead of, for example, recommending products that generate higher commissions).
For some brokerage and advisory firms, the changes mean little. But for others, the new regulation will require significant investments in technology and process changes in order to comply with the onerous compliance challenges created by this change.
When it comes to the future of Americans and their retirement savings, the glass is either half empty or half full, depending upon whom you ask. A recent article from The Providence Journal suggests a less optimistic viewpoint, citing that more than half of all U.S. households have not saved adequately for retirement, and the problem is growing worse.
Mark Miller of Financial Advisor wrote a piece last week on how “People are Flunking Retirement Readiness, And What To Do About It.” He uses an airplane analogy illustrating that 30 years ago a professional financial pilot would manage your defined pension plan, but today most 401(k) plans are being controlled by the passengers or plan participants.
The Law of Inertia: A body in motion will stay in motion and a body at rest will stay at rest unless an external force acts upon it.
The Law of Inertia, while originating in the world of physics, is amazingly applicable to the world of retirement planning. As plan sponsors and financial advisors know, getting people who are not saving to start saving requires a force nearly equal to the gravitational field of a planet. And getting people to save more than they are already saving is an accomplishment of galactic proportions.
With all that goes into running your retirement practice, time management can be a challenge. According to an article from Financial Advisor magazine, advisors spend an average of 13% of their time on business development or new client acquisition.*
Being able to spend more time with current and potential clients, means more time growing your business. An investment manager can help with this by providing additional oversight of the plan while freeing up more of your time to help your clients.
Adding 3(38) Investment Management Services is a new approach in the retirement plan industry, and one of the biggest concerns financial advisors have is what do you say when a client asks, “If you are outsourcing the fund selection to an investment manager, what do you do?” This can be a tricky conversation because many plan sponsors don’t understand their fiduciary responsibility and many believe the financial advisor is the fiduciary .