As a recently finalized Labor Department investment advice rule increases pressure on financial advisers to justify their fees, they can prove their worth by helping clients retire comfortably, according to financial industry officials.
Worries about the DOL rule permeated the
InvestmentNews Retirement Income Summit this week in Chicago. But the name of the event also highlighted an opportunity for advisers.
“There's no better way to demonstrate [your value] than helping people plan for their retirement,” George Vazquez, vice president of personal retirement at Natixis Global Asset Management, told about 300 advisers attending the event.
He highlighted a survey that found that 9% of people thought they could take an annual 20% distribution from $1 million over the course of 30 years.
Advisers can provide crucial help in determining how much money clients will need in retirement, how long it will last and how much risk they should take with their assets.
“You can educate clients around this,” Mr. Vazquez said. “That's your value proposition.”
But an adviser's worth now centers on how much he or she is charging, thanks to
the DOL rule, according to Robert DeChellis, president and chief executive of Allianz Financial Services.
(More: Coverage of the DOL rule from every angle)
The focus on price is distorting the discussion about advisers, just as millions of Americans are entering or nearing retirement, he said.
“The need for you has never been greater,” Mr. DeChellis said during a Monday presentation at the
InvestmentNews event. “That's the travesty of all of this.”
Advisers are not only being squeezed by the DOL rule, they're also battling perceptions that active investment management is “too expensive” compared to passive management, and that using an adviser is “too hard” compared to using online advice.
For charges above five basis points, “you have to demonstrate your value,” Mr. DeChellis said.
A good way for advisers to show what they're worth is by helping clients develop their vision for retirement.
There is a “massive disconnect between expectations and what they need to do to reach those expectations,” Mr. Vazquez said.
The challenge for advisers is to adjust their own approach from helping clients accumulate wealth during their working years to helping them spend their money in retirement.
“We have not done a good job appreciating the difference that makes in someone's life,” Mr. Vazquez said.
