Hegna's Hotseat

Cracking the Retirement Income Code: “Hello to Close with Confidence”


or this blog post, I am proud to present content written by my own personal financial planner, Curtis Cloke. For those of you who don’t know him, Curtis is a renowned industry speaker, serving as an adjunct educator for The American College and the RICP®. He has over 30 years of experience in retirement planning, and he is a Million Dollar Round Table member with twelve Top of the Table and three Court of the Table qualifications. Thank you for this contribution Curtis!

Thanks Tom! If there is one lesson I could teach to your readers it is this: The landscape has changed dramatically in the retirement-planning arena. The evolving regulatory environment has re-defined the industry and necessitated the development of new, client-focused strategies. The time has come to adapt or be left behind.

We’re All Fiduciaries Now

Financial advisors have witnessed seismic shifts in their responsibilities to clients over the past five years. Regulatory agencies have focused on raising the bar from the old “suitability” standard to the fiduciary, “best interest,” standard.

The U.S. Department of Labor’s (DOL) version of a Fiduciary Rule was vacated by a federal appeals court last year. However, they may be issuing a revised version of the rule by late 2019 that is in line with the court’s decision. In addition, the U.S. Securities and Exchange Commission (SEC) is getting into the game, although the precise contours have yet to be finalized. Lastly, many state regulatory agencies are picking up where the feds left off to promote their own fiduciary standards.

What this all means is that the financial industry has moved toward a higher standard of providing advice whereby the client’s best interest is paramount. In our client meetings, we advisors have to leave our needs at the door. Beyond the activity in the regulatory realm, it is what clients are coming to expect as well. The train has left the station, and as advisors, we don’t want to be left on the platform!

The Heart of the Matter

An important component of serving our client’s best interest is understanding their needs. Too many financial advisors go right to a “one size fits all” approach that emphasizes products. The initial discussion should not be about products but, rather, who the client is and what keeps them up at night. Ask probing questions that are easy to answer yet enormously revealing. This approach will allow you to take your client relationships to a high level in a short amount of time.

When it comes to retirement planning, I’ve found the best approach is to get a sense of someone’s most deep-seated financial beliefs and where they are coming from emotionally when they are thinking about money. I ask questions such as:

Where are you from, and what was it like for you growing up?

What did you learn about money growing up?

What is the most difficult financial experience you have had?

What is the best financial experience you have had?

You would be amazed at how most clients are happy to open up about these issues that, in many cases, no one has ever asked them about. Using this foundation of questions—along with listening—makes it much easier to discuss retirement goals, risk tolerance, and investment strategies. Retirement-income planning is as much an emotional process as a logical one. The only way to provide a truly-complete financial plan for your clients is to craft one that can address their fears and anxieties plus their need for income reliability, liquidity, and growth.

Retirement Income Planning Meets the New Reality

Beyond having a better understanding of our clients’ needs, the fiduciary standard means advisors have to meet those needs on a customized and optimized basis. The problem in our industry is that advisors have been driven by institutional biases into promoting two different types of investment products and strategies.


First, there is the insurance camp or as we call it “promise-based” income. These are annuities such as DIAs, SPIAs, FIAs* and VA* (*with income riders). The focus is on reliable income and principal protection. They protect clients from risks such as outliving their savings and market downturns.


Second, there are stocks, bonds, and mutual funds or “market-based” assets. There is a myriad of equity funds to select from, and the funds may produce large annual gains during a bull market. Once a client is retired, advisors in this camp typically recommend a systematic withdrawal plan (SWP). By withdrawing three or four percent annually, the client will have a predictable income, assuming there are no market gyrations.

The dilemma in the new environment, with the best interest standard, is that neither approach by itself is the solution. We need a hybrid approach that puts the client’s interests first. Just as a good mechanic has multiple tools for repairing all makes of cars, we must have a retirement-planning toolbox that utilizes all the different investment vehicles from annuities, life insurance, and long-term care products to mutual funds and bonds. Our recommendations should be based on the client’s needs and objectives with no preferred products or solutions.

The hybrid approach utilizes the strengths of both promise-based and market-based assets to “buy income and invest the difference®.” This strategy provides a “floor” of essential retirement income, which is the amount needed for covering basic expenses. It combines promise based income assets (such as annuities) with Social Security and, for those lucky few, pensions.

The income floor is from reliable sources, so clients would not have to worry about the whims of the financial markets, particularly as they approach what The Prudential Insurance Company of America calls the Retirement Red Zone®. The key to this approach is to have clients start transitioning a portion of their retirement nest egg into promise-based income assets five to ten years before they retire. The income payments can be deferred until after they retire and their principal would be protected from market fluctuations during this critical time period. By purchasing retirement income early, clients may also benefit by receiving a favorable income payout rate that’s a result of the delay period.

The other major advantage of constructing a solid floor of reliable income is that you can free up your client’s market-based assets for more aggressive positioning. It should allow them to be less dependent on income drawdown from these assets. They can be used for other purposes too, such as liquidity, growth, and legacy objectives.

All of this is possible once we understand and adapt to the new realities of analyzing and addressing retirement income planning. We must expand our financial toolbox, tailor the investment choices to the client’s needs, and always remember that our client’s interests come first.

Optimize Your Toolbox

Thrive University Online focuses on the importance of the psychology and biology that goes beyond the financial discussion of retirement planning. Pre-retirees process what they see, hear, and read from three parts of the brain: Cortex (rationale), Limbic (emotion), and Inner Brain (instinct). The limbic part of the brain is where consumers make the decision to act. Thrive University online helps advisors and agents master the skills needed to connect emotionally while making the prospect “feel heard” while also appealing to their “survival instincts” (i.e. what’s in it for me?”).

The key to a profitable practice is to tap these powerful techniques when developing your process. The words, methods, and framing of the retirement-income discussion are vital to engaging pre-retirees. This online course will give you powerful and practical words, processes, and tools to keep your prospects engaged throughout a logical three-meeting process to move from “hello” to close with confidence. Learn how this course will optimize your toolbox at https://thriveuonline.mentored.com/.

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