Only a minority of financial advisers are well-versed in
Social Security rules and comfortable recommending specific claiming strategies to clients, according to a recent report on this increasingly important facet of retirement planning.
“Advisers view
Social Security as growing in importance, but only one in three are comfortable making claiming recommendations,” said Howard Schneider, president of Practical Perspectives and author of the report, which is based on the results of an online survey of more than 600 advisers conducted earlier this year.
Mr. Schneider and his co-author Dennis Gallant, president of GDC Research, discussed the results of their report, “
Social Security Support and Financial Advisors — Insights and Opportunities 2014” last week during a webcast sponsored by the Retirement Income Industry Association.
(More: Advice industry adapts to changing concept of retirement)
They noted that although there has been a proliferation of Social Security claiming tools and software over the past few years, only about 13% of advisers currently pay for a subscription service. Most advisers rely on free tools and calculators available through the Social Security Administration or value-added services from their broker-dealer, custodian, insurance companies or mutual funds.
But that is likely to change as advisers demand for Social Security training and support increases in response to consumer questions about benefits and claiming strategies.
“The problem is there is no rating system for the quality of Social Security tools,” said Mr. Gallant. “Advisers are looking for recommendations on which tools are best,” he said. “But the definition of 'best' may not be consistent among different types of advisers and depends on whether you want to be fluent or merely conversant in Social Security.”
LOOKING FOR ADVICE
I agree. I had no sooner finished listening to the webcast when an e-mail from an adviser popped up in my in-box asking for advice on which Social Security software program to purchase.
I listed several independent programs including
Maximize My Social Security,
Social Security Explorer,
Social Security Analyzer and
Social Security Timing, and suggested that he ask the companies for a free trial. I urged him to choose a program that was user friendly and suited his objectives and budget. Program costs range from about $200 to $1,000 per year.
Some advisers use Social Security claiming strategy reports as a prospecting tool for new clients. A basic tool that compares the potential monthly cash flow and cumulative lifetime benefits of competing claiming strategies is sufficient for those advisers. Some programs include lead-generating tools.
Others who focus their practices on retirement income planning may be willing to invest more time and money in a program that goes beyond claiming strategies and integrates with existing planning software. That's one of the reasons that
BlackRock and Money Guide Pro scored so high in the Social Security online survey.
Advisers who want to fortify their knowledge may want to take the additional step of enrolling in a Social Security training program like those offered by Horses Mouth and the National Social Security Association.
(More: Everyone's talking about postponing Social Security benefits)
The report found that more than nine in 10 advisers discuss Social Security issues with prospective and existing clients. But the discussion varies with three key segments: advisers who focus primarily on education and information (26%); those who illustrate different Social Security scenarios but do not recommend a specific approach (30%); and those who recommend specific Social Security claiming strategies (36%). Only 8% of advisers indicated they do not discuss Social Security with clients.
Not surprisingly, advisers who are more engaged with Social Security discussions with clients are more willing to pay for a tool or software. More than 60% of advisers who provide clients with various Social Security scenarios or who recommend specific claiming strategies are willing to pay a fee, compared with less than half of advisers who focus mainly on education.
The use of software tools and technologies also vary by service channel. Wirehouse advisers are least likely to use software or technology to deliver Social Security support and are least willing to pay a fee.
On the flip side, more than three in four at RIAs — 78% — are willing to pay a fee, including 24% who are receptive to paying $500 a year or more. Independent advisers are also more willing to pay a fee for Social Security tools, with nearly two-thirds of them indicating they would do so.
The report found that demand for Social Security support is significant and growing, with roughly three in four advisers saying they are likely to seek out additional support, content or tools related to Social Security in the next 12 months.
That means the competition to develop an expertise in Social Security rules is heating up. Keep sending me your questions, and I'll try to make sure we all continue to expand our knowledge of this important piece of retirement income.
(Questions about Social Security? Find the answers in my new e-book.)
