Helping retirement clients in their pursuit of lifetime income
Helping retirement clients in their pursuit of lifetime income
The company was committed to a financial-planning-first model, an approach I still use when working with clients. Coming out of college, I knew relatively little about the markets, investment philosophy, and how to build a financial plan. Ameriprise offered what I think is one of the foremost training programs in the industry, a combination of classroom learning and hands-on training in the field.
After some success building my client base, I moved into management. It gave me the opportunity to hone my management skills and to supervise many more client cases than I could possibly see in just my own practice. That was a very meaningful experience in terms of delving deeply into different kinds of client financial-planning situations.
The four broad areas of our approach are:
- Needs assessment: We audit a client or client couple’s current estate to determine the amount of income needed in the future and any potential factors that may impact the financial plan. This leads to setting clear financial goals.
- Analysis and design: We identify any gaps in a client’s current planning, coordinate varied investments and income streams, and determine risk tolerance. With these factors established, we can offer alternative strategies and identify financial-planning solutions.
- Implementation: After personalized recommendations are mutually agreed upon, we can monitor the execution of the plan and help ensure that a long-term focus is maintained.
- Service and support: Once the first three phases are completed, one of the most important aspects comes into play. We want to conduct a schedule of periodic review sessions to make sure that clients are well-informed on outcomes and their progress toward objectives, and to monitor any changes in their life situation or new financial developments. The financial plan has to be an adaptable road map, so revisiting the plan when life circumstances change is always an option.
We stress that it is all about creating an income strategy and that managing money in the distribution phase is inherently different from managing money in the accumulation phase. Asset-allocation strategies that may have worked fine in one’s accumulation years may no longer be appropriate for clients entering their distribution years. Buy-and-hold market-allocation models of diversification will not protect a retiree’s income plan in very poor market years. If there is a significant market event when a retiree is close to taking income or already in the distribution phase, they could face serious trouble over the long term.
We have developed an approach at IFP called the Lifetime Income Model. This helps us develop a strategic retirement distribution plan—one with a goal of helping retirement clients create an income stream and manage risk while providing tax efficiency and preservation of assets. It is designed to address current income needs while allowing other assets the opportunity to grow until they are needed. By allocating assets into a series of time-sensitive distribution phases, we can efficiently organize a client’s income needs throughout their lifetime.
Here is where we dig deeply into those TNT question areas: Which assets should be used first? Is there enough money saved? Are assets in suitable places to manage volatility within the portfolio and to reflect a client’s individual risk tolerance?
I find it worthwhile to simply map out with a client their big-picture financial goals over the duration of their potential retirement. We visually establish five-year time increments and the income gaps that exist during those periods. To greatly simplify, for the first five years, we want assets earmarked for distribution to be facing little market risk.
As we go out further on the timeline, we can recommend strategies that offer the potential for higher growth, along with somewhat higher risk. But we look to manage that risk by using time and actively managed strategies that are designed to offer some defensive measures if markets start to head south. These do not necessarily have to be pure equity strategies, and we have a wide range of options from our third-party managers, including absolute-return strategies and actively managed bond strategies.
Andrew Kern is a wealth-planning advisor with Integrated Financial Partners, Inc., based in Harrisburg, Pennsylvania. Mr. Kern’s firm has a strong focus on helping clients formulate goals and develop suitable long-term strategies for retirement planning, estate planning, and wealth management. He says, “Financial planning can help make the difference between those who enjoy a comfortable retirement and those who struggle.”
A native of the south-central region of Pennsylvania, Mr. Kern was raised by parents who were both educators in the public-school system. He says they “encouraged hard work in school and were supportive in all ways.” He was a three-sport athlete who played college football at James Madison University, where he graduated with a degree in business marketing.
Following college, Mr. Kern was recruited into the financial-services industry by American Express/Ameriprise Financial. After eight years building his own practice and acquiring managerial experience, Mr. Kern joined Integrated Financial Partners in 2013.
Mr. Kern and his wife live in the Harrisburg area, have two young children, and enjoy “seeing new places as a family, especially the beach.” Mr. Kern devotes time and energy to several charitable causes, including Big Brothers Big Sisters of America, Tour de Pink Fundraiser and Rider, and the American Cancer Society. He and his wife started a foundation that provides scholarships to graduating high school seniors. Mr. Kern is an avid sports fan and enjoys golf and fitness training.
Disclosure: Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Integrated Wealth Concepts, a registered investment advisor. Integrated Wealth Concepts and Integrated Financial Partners are separate entities from LPL Financial.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. Stock investing involves risk including loss of principal. There is no assurance that the investment objective of any investment strategy will be attained. No strategy assures success or protects against loss. Bonds are subject to market and interest rate risk if sold prior to maturity. Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment which may accelerate the velocity of potential losses.
Post-publication note: Mr. Kern has been registered with Cetera Advisor Networks LLC since 2018.
Photography by Melissa McClain