Retirement planning bid by agents draws critics

Nov 12, 2007 @ 12:01 am

By Darla Mercado

Agents who want to expand their businesses into retirement planning face critics among transaction- oriented agents and financial planners. Advisers question the quality of advice these professionals can provide. Also, this new role creates a rift between retirement planners who want to integrate these services, and old-fashioned agents who believe that planning and products should remain separate. "If an agent wants to do it all, they surely can, but they will never make as much money or serve as many people," Brent D. Gardner, a chartered life underwriter and chartered financial consultant who is principal of the Gardner Financial Group in Wichita, Kan., wrote in an e-mail. "Given my experience, I've never found a job done well by any agent that's trying to do it all." According to a report, "Retirement Income Planning — The Advisor Challenge," from Windsor, Conn.-based LIMRA International Inc., the leading edge of 78 million baby boomers is transitioning to retirement and entering a prime planning phase as they figure out how to draw down income.

Only 22% of pre-retirees have created a plan to convert assets to income, but this "planning" could be as basic as adding their projected Social Security and pension benefits, said Matt Drinkwater, assistant managing director of retirement research at LIMRA.

"The need for expert advice is growing because people can't do the income planning on their own," he said. "Even if they did, it may not be as complex or as thorough as it would be if they work with an adviser."

Some of the components of retirement planning include determining expenses and creating an assets-to-income plan.

Mr. Drinkwater's presentation recommended that agents phase out the transactional approach as clients near age 50. Then they can move to a consultative approach that calls for a comprehensive written plan to help move into the income stage.

"Many producers would prefer the transactional approach because it's easier, plays to their strengths and is generally well-rewarded," Mr. Drinkwater said. "But during the transition and income phases, the simple approach may be insufficient."

However, the role of insurance agent as planner has raised the ire of insurance agents, who argue that they are salespeople.

"I'm a life insurance agent. The agents I work with are life insurance agents," Mr. Gardner said. "There's never any doubt in a prospect's mind why we are calling on them, because we don't hide behind an invented profession to obfuscate the truth about why we're here."

And that's not necessarily a bad state of affairs. In a consultative setting, planning can be lengthy, and that may delay the purchase of products and limit the number of clients.

"I have told people that there are days where I think I'm running a charity," said Richard Van Der Noord, a certified financial planner at dually registered Van Der Noord Financial Advisors Inc. of Greer, S.C. "The clients need the advice, but they have no mechanism to afford it unless it's married with the investment product."

Clients are also likely to make repeat purchases if they develop a long-lasting relationship with their advisers, Mr. Drinkwater said. But there may be some hypocrisy in playing the retirement planner role if the primary source of income comes from selling insurance, industry observers noted.

"Lazy agents keep going back to existing clients, layering product after product on the same clientele," Mr. Gardner said. "If an agent has a full pipeline of prospects and they don't depend on the outcome of every situation in order to pay their bills, then they don't need to do it all."

But LIMRA's research reveals that two out of three retiree or pre-retiree clients buy products as a result of creating a retirement plan with an adviser.

The increase in sales could mean that clients, after seeing the total picture through planning, purchase appropriately recommended insurance products.

"My practice is to take the time and understand how the client feels," said Philip E. Harriman, a chartered life underwriter and chartered financial consultant who is founder of Lebel & Harriman LLP in Falmouth, Maine. He is also president of the Million Dollar Round Table, a Park Ridge, Ill.-based association of top producers.

"That discussion with a client — developing a value statement, principles and priorities — is where you ought to start," Mr. Harriman said. "That leads to talking about what type of product best fits their lifestyle and income."

But advisers remain skeptical of the quality of that advice. "Nobody wants to talk to an insurance salesman, but if he calls himself a planner, that's what people want," said Mr. Van Der Noord. "Ultimately, it could be only 10% planning."

LIMRA's suggestion that the insurance industry shift to planning, as opposed to selling only, was applauded by Tom Orecchio, chairman of The National Association of Personal Financial Advisors in Arlington Heights, Ill.

But he is wary of how registered representatives provide planning advice.

"There's an obvious conflict of interest — they're looking to make a product sale," said Mr. Orecchio, a principal and executive vice president of fee-only Greenbaum & Orecchio Inc. in Old Tappan N.J.

"Good advice is better than none, but they should register as [registered investment advisers] and be subjected to fiduciary duty and scrutiny from the Securities and Exchange Commission."

LIMRA's Market Awareness Series, which is based on Mr. Drinkwater's research, shows reps that they can discuss aspects of planning with clients. "You can counsel clients about income distribution and help them understand what assets they should tap," said Don Fuller, assistant vice president and director of LIMRA's Center for Performance Improvement. "We see that as financial planning but not investment advice."

In the meantime, financial professionals continue to balance the shift to planning but remain open to transactions services when necessary.

"For the person who just wants a question answered, you'd be better off helping him. But we try to nudge them into thinking about the bigger picture," Mr. Harriman said.

Mr. Van Der Noord agrees. "People are hungry for advice and consultation," he said. "Investment products are the engine, but they're not the whole limousine that takes people to retirement."

Darla Mercado can be reached at


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