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Clients' retirement funding vexes advisers

Most can't maintain desired standard of living, study shows

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By Andrew Coen

August 18, 2008 6:01 am ET

The vast majority of financial advisers doubt that their clients will have adequate retirement funds to maintain their desired standard of living, according to a new survey.

Ninety percent of respondents to a Curian Capital LLC survey of 1,305 independent financial planners indicated that more than 80% of their clients would lack the necessary retirement assets to fund anticipated spending.

"To see that number stand out that way was kind of shocking," said Chris Rosato, senior vice president of strategic development for Denver-based Curian. "Retirement income planning has to take place earlier."

Despite the sense that most of their clients lacked adequate retirement funds, most advisers surveyed (69%) hadn't been spurred by market volatility to change investment plans. Forty percent said the biggest threat to a client's retirement plan was insufficient time to build wealth, not rising health care costs and the uncertain future of Social Security — concerns that have been cited in the past.

Inflation is a major obstacle, according to Geoffrey VanderPal, principal of Las Vegas-based Elite Financial Planning Group of America Inc., who said that 70% to 80% of his clients don't have enough money to maintain their standard of living after retirement.

"The fundamental issue is inflation eroding away at capital value," said Mr. VanderPal, whose firm manages more than $100 million.

Many advisers were surprised by the Curian results. Bedda D'Angelo, president of Durham, N.C.-based Fiduciary Solutions Inc., said the term "lifestyle" can mean different things to different people.

"Virtually all of my clients live very well but substantially below their means," said Ms. D'Angelo, whose firm manages $25 million in assets. "Most of their friends and family would be shocked and intimidated if they knew how much these people were really worth."

Ellen Siegel, president of Ellen R. Siegel & Associates, was also caught off guard by the results. "

"Most of my clients have an ideal retirement date/income, and a realistic one," said Ms. Siegel, whose Miami-based firm manages more than $33 million and is affiliated with Boston-based LPL Financial.

A pension plan can also play a large role in whether clients are adequately prepared for retirement, according to Rita Cheng, a financial planner in the Bethesda, Md., branch of Minneapolis-based Ameriprise Financial Inc. Many of her clients work in government and are covered by defined benefit plans — a big reason she hasn't seen the trends suggested by the Curian survey.

"For the clients I'm working with, I don't believe the numbers are that high," said Ms. Cheng. "They are pretty proactive."

Ms. Cheng declined to disclose her firm's assets under management.

If the Curian figures are accurate, that is a troubling sign both for the adviser and the investor community, ac-cording to Bob Burger, a financial planner with Perspective Financial Services LLC, though he said that he hasn't personally seen a trend toward lack of retirement preparedness.

"I wouldn't be comfortable if I felt that 80% of clients didn't have the funds to adequately retire, since that is an adviser's No. 1 goal," said Mr. Burger, whose Phoenix-based firm has just under $100 million in assets under management.

As many of his clients have high net worth, Rick Stout, managing director of Benchmark Wealth Management LLC, estimates that just 10% won't have adequate retirement funds to maintain their standard of living. Most clients are referred to his Old Lyme, Conn.-based firm and are on solid financial footing.

"The clients that are referred to us are referred to us by solid people," Mr. Stout said.

The firm manages $110 million in assets.

The Curian survey sample included fee-based advisers and brokers, according to Mr. Rosato.

E-mail Andrew Coen at acoen@investmentnews.com.

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