I applaud the Consumer Financial Protection Bureau's recent report warning that the proliferation of sometimes-questionable senior certifications and designations can put older adults at serious risk.
But I hope that it won't dampen the enthusiasm of financial advisers who want to develop their expertise in retirement income planning, because it is sorely needed.
As the nation's 78 million baby boomers turn 65 at the rate of 10,000 people per day, the financial services industry must shift its focus to distribution, from asset accumulation. Increasingly, advisers are realizing that Social Security-claiming decisions can play an important role in creating reliable retirement income and that health care costs can have an enormous impact on how that income is spent.
A new study released today by Merrill Lynch Wealth Management found that when it comes to financial goals, aging boomers seek peace of mind over wealth accumulation by a 7-to-1 margin. The findings are based on a survey of more than 6,000 respondents 45 and older that was conducted in partnership with Age Wave, a research and consulting firm specializing in the impact of aging on society, business and culture.
The study found that seniors aren't so much retiring as they are reinventing.
They view the “longevity bonus” as a chance to explore new options, pursue old dreams and live life to the fullest. More than half the respondents view retirement as a whole new chapter in life.
Although boomers welcome the extra time to pursue new interests and spend more time with family and friends, they are concerned about outliving their assets and experiencing a serious health disruption. Health problems and the cost of health care top respondents' list of retirement worries.
Not knowing how long one is going to live causes insecurity about the ability to live on one's own assets, with women expressing significantly more concern than men about running out of money, 61% to 47%.
Another key finding of the study is the potential financial impact of supporting family members across multiple generations, a lingering legacy of the Great Recession. Balancing an individual's or couple's retirement needs with those of other family members, including frail parents, unemployed adult children or dependent grandchildren is a growing and complicated challenge for advisers.
“Most people understand that retirement planning is not a "once and done' proposition,” said David Tyrie, head of personal wealth and retirement for Bank of America Merrill Lynch. “Where guidance is needed most is helping people understand how all of these variables and decisions work together.”
Current and future retirees need advisers who understand how to navigate this new phase of life, not salespeople who are pushing the latest investment or insurance products. Meanwhile, Americans are confused about where they should turn for help.
Glut of credentials
The CFPB report found that there are more than 50 senior designations used to claim specialized knowledge in helping older Americans with retirement decisions.
The glut of credentials, coupled with the fact that the acronyms for some of those credentials are nearly identical, puts older adults at serious risk of fraud, the report concluded.
Adding to the confusion is that different federal and state regulators oversee advisers with the various designations, making it hard for seniors to figure out where to file a complaint.
Fewer, better designations are needed.
Over the past few years, The American College (TheAmerican College.edu) and the Retirement Income Industry Association (RIIA-USA.org) have launched stellar retirement income designation programs.
So far, 11 students have earned the retirement income certified professional designation after completing the three required courses, each one involving about 25 hours of video lectures and interviews, and passing six hours of proctored examinations.
More than 50 advisers have been awarded the retirement management analyst designation by the RIIA.
Candidates for the latter designation must pass a RIIA-approved -education program, such as the Retirement Management Program at Boston University's Center for Professional Education or the Customized Retirement Management Seminar at Texas Tech University. Candidates must also pass an examination.
“Americans have mixed feelings about living longer and transitioning into retirement,” said Ken Dychtwald, founder and chief executive of Age Wave. “Even those who have saved adequately can be anxious and often overwhelmed by this complexity and the unknowns they face.”
Mr. Dychtwald will share more of his findings in his keynote speech at the InvestmentNews Retirement Income Summit, which will be held May 13-14 in Chicago.