Today's Income Planning

Wired For Service

Tech’s growing role in retirement income planning

by Ken Lotocki

Mr. Lotocki is the product director at Advicent, a provider of SaaS technology solutions for the financial services industry, based in Milwaukee, Wis. For more information, visit their website at

Income planning for life after retirement is perhaps the most important and complex service in a financial advisor’s repertoire. Without the right financial technology, the process from start to finish is enough to make your head spin.
Planning for retirement requires an intimate knowledge of your clients’ expenses, income, qualified accounts, investments, and desired lifestyle in retirement. Given all of these moving parts, a flurry of questions often arises. When should I file for Social Security? Which investments should I pull from to meet my income needs and when? How will the new tax law impact my retirement?

These questions probably sound familiar to any financial advisor tasked with preparing clients for retirement. While answering them may feel like a lot of work for the planner, it pales in comparison to how significant and stressful these decisions are for the client. After graduating from college, getting married, or having a child, retirement is one of the most significant moments in a person’s life, and it requires many massive decisions that should never be taken lightly. Proper guidance in navigating these decisions is a necessity to ensure the right plan is in place long before blowing out the candles at a retirement party.

Longevity & Health

Additionally, individuals are living longer than ever before while health care costs continue to rise at an astronomical rate. According to a recent report from the Centers for Medicare and Medicaid Services, Americans spent approximately $3.3 trillion on health-care-related expenses in 2016, which represents about $10,348 per person. Health care costs also rose by 4.3 percent in 2016, a rate that surpasses both wage growth and inflation.

For these reasons, income planning for retirement is one of the largest challenges facing investors. Your clients know this, and running out of money in retirement is often their biggest fear.

Advances in new financial technology, however, make income planning for retirement a much more efficient and effective process. While there will never be any substitute for a human’s ability to impose judgment and make decisions, technology today plays a pivotal role in helping the advisor make the best recommendations possible.

If you are an advisor developing income plans for your clients facing retirement, you must add a technology partner that can augment your services with tools that will not only make your life easier but also produce the most desirable outcomes for your clients. Below are a few capabilities we deem to be the most essential for advisors helping clients plan for retirement.

Gaining a holistic picture with account aggregation tools

Investors today typically possess multiple accounts held at various financial institutions. They might have a brokerage account with one firm, a savings account with another, and a 401(k) with yet another firm. Where they spend their money could be equally as fragmented, with funds going to a child’s college tuition, recurring donations to charity, mortgage payments, and more. Obviously, this presents a challenge to the financial advisor attempting to come up with a holistic picture of a client’s financial life.

As opposed to painstakingly tracking down each account with every financial institution and manually entering the data into static spreadsheets, account aggregation technology can scour the web and data vendors for this information and pull it into one location. In minutes, an advisor can see where the money is going, where it is coming from, and where it needs to be.

the retirement conversation does not have to end when the client walks out of your office. Clients can log in and analyze their income plans, develop questions for their advisors, and gain confidence in the results presented

Not only does the right software reduce time spent developing plans by up to 35 percent, it provides a powerful look into the client’s financial situation and allows the advisor to build multiple modeling scenarios on which to base their recommendations. These models illustrate how certain decisions made today can affect the client’s nest egg down the line.
The advisor can also run a statistical analysis to demonstrate how a certain market correction will impact their income needs and make recommendations to ensure the client is accounting for the worst possible scenario. With these models, the advisor can be confident that their recommendations are in their clients’ best interests. From a compliance standpoint, keeping the models justifying their recommendations on file is extraordinarily important in today’s fiduciary environment.

Nimble modeling to evolve with life’s needs

Income plans for retirement become obsolete the moment they are published. Instead, investors need a nimble plan that can adapt to their needs as their lives change. Technology empowers financial advisors to make alterations to financial plans, then extrapolate the implications of those changes throughout the client’s life. While this process is possible on paper and through the use of static spreadsheets, technology allows advisors to make these changes and run models at the press of a button.

Not to mention, with the addition of client portals to your technology offering, the retirement conversation does not have to end when the client walks out of your office. Clients can log in and analyze their income plans, develop questions for their advisors, and gain confidence in the results presented. Possessing the ability to access their income with complete transparency will help the client understand why the plan was made and how to stay on track for a successful retirement. Income planning has become more collaborative than ever, and investors now expect the ability to access their information from anywhere at any time.

Taking another look at asset allocation

As investors retire, it is generally recommended that they reallocate a portion of their assets into less aggressive, less risky investments. With the right asset allocation technology, advisors can demonstrate why this transfer makes sense by showing the external market factors that could potentially disrupt their portfolio in retirement. By running a statistical analysis, advisors can show exactly how different levels of volatility will affect a portfolio. Advisors can also develop an income protection plan to ensure their client can still have a successful retirement in the event of a market downturn.

Requiring the right technology partner

Financial technology is not only something of which investors are aware but also something they expect. If a prospective client sees your record-keeping system as a collage of color-coordinated sticky notes, do not be surprised to find them running for the door. The efficiencies gained from technology on both sides of the client-advisor relationship are too powerful to ignore.

Advisors must remember, however, that not all technology providers are created equal. While it is important to choose a partner that checks all the boxes in terms of the capabilities your clients will need, financial advisors must select a technology vendor that will serve as their firm’s true partner. Too often, technology providers disappear after making the sale. Vendors that will answer the phone and help your advisors solve specific issues their clients may have are invaluable. ◊