1. Underpowered Analytics: While they were cutting edge two decades ago, the analytics behind today’s planning platforms now look simplistic and crude. Over the last 20 years, advisors have gained access to high-end computing power and cutting-edge mathematical models in their investment strategies. Why hasn’t retirement income planning kept up?
2. Misleading Focus on Probability of Success and Failure: Traditional planning platforms focus on probability of success and failure. But these statistics are misleading. They suggest retirement outcomes are all-or-nothing, rather than a range of possible experiences. These terms can also lead clients to focus on failure and misunderstand their true retirement outlook.
3. Plans that aren’t Plans: The plans you can generate on today’s platforms are not built for the ongoing services you provide. In fact, they are not really plans at all – they are static snap-shots that assume no ability to adjust. True plans would include guidelines for adjustments as circumstances change, helping you advise clients through the years as changes are needed.
4. Untested Plans: Planning platforms do not test plans against real world examples to see how they perform in practice. Lack of testing makes it hard to know how much confidence you should have in your advice and difficult for clients to understand what retirement experiences can look like.
5. No Ongoing Plan Management: Your retirement income planning platform should understand that things change, and provide a scalable solution for continuous, fiduciary-ready plan monitoring and management. Many basic tasks you do today when updating plans can be automated, leading to better quality planning and freeing you up for more important activities.
The good news is that there is a light at the end of the tunnel. Research shows that improved analytics and ongoing plan monitoring and management can lead to significantly improved retirement outcomes. As we’ve pointed out in previous articles of our Lab Notes series, there are opportunities for advisors to address current planning platform deficiencies and provide additional value to clients.