RETIREMENT
A matter of trust: Advisors and
retirement income planning
Jafor Iqbal is Assistant Vice President
for LIMRA Secure Retirement
Institute, leading the retirement
income initiative by studying retirees
and the role of financial advisors in
retirement income planning. Prior
to joining LIMRA, Iqbal was Director
of Product Management at Fidelity
Investments.
31
%
18 %
Extreme/
considerable trust
Some trust/
no trust/not sure
All households
27 %
18 %
Extreme/
considerable trust
Some trust/
no trust/not sure
Mass-affluent: assets <$500k
38 %
Extreme/
considerable trust
21 %
Some trust/
no trust/not sure
Affluent: assets $500k+
Figure 1: Percent of households where
80% or more assets are managed by their
advisors and their degree of trust
22
Perspectives
Q4 2019
Trust is precious and extreme trust is rare. LIMRA Secure Retirement Institute (LIMRA SRI)
research finds, among all households, 21% of all households put extreme trust in their family,
as their top choice, to help them prepare for retirement in their own best interest. Employers
come second (14%), and financial advisors third (11%). Less than 10% of the population have
extreme trust in financial institutions.
Recently, LIMRA SRI explored the relationship between consumers and advisors. The study
finds consumers feel the strongest levels of trust for advisors who help them prepare for
retirement, regardless of age, marital status, gender or whether they are retired or not. One
quarter of clients have ‘extreme trust’ in their financial advisors to act in their best interest
and help them prepare for retirement.
Why does trust matter?
LIMRA SRI research finds households with extreme or considerable trust in advisors are
more likely to allow their advisors to manage a greater portion of their financial assets. In both
the mass-affluent and affluent markets, 50% more households with extreme or moderate trust
have entrusted 80% or more of their assets with their advisors to manage, compared with
households with little or no trust (Figure 1).
These findings suggest financial advisors who can cultivate trust with their clients stand the
best chance to grow their practices and be successful. Also, clients who trust their advisors
refer them to their friends and family. According to LIMRA SRI findings, more than a third of
consumers say they would only work with a financial advisor who was recommended to them
by their family members or friends.
Retirement income planning improves extreme trust
Working with a client to help them complete a formal retirement income plan builds trust
and leads to them consolidating their assets with you. Our research shows extreme trust in
advisors is nearly double with clients who have a formal plan (33 percent), compared with
clients who do not have a plan (17 percent). On the flip side, half of clients without a formal
income plan have little or no trust in their advisors. Prior LIMRA SRI research shows clients
with a formal written income plan view their advisors as more accessible, having a better
understanding of their long-term needs, and believe their advisors are more likely to put
clients’ interests first.
Despite the overwhelming evidence of the value of developing a formal retirement income
plan with clients, less than 40% of advisors’ clients have a formal retirement income plan.
While it is a time-consuming task (on average advisors report it takes 6-8 hours to complete),
advisors who invest that time to help clients prepare for their retirement improve trust levels,
get referrals, and gather more assets.
In today’s ‘best-interest-of-the-client’ environment, building an advisor practice based on
trust is essential, not only for the short term, but for continued business growth and more
confident, satisfied clients.