Research Finds That Written Retirement Income Plans Can Help Drive Business Growth for Advisors

BOSTON, MA, June 20, 2011 -- Fidelity Investments®, the nation's No. 1 provider of workplace retirement savings plans and Individual Retirement Accounts (IRAs), today released Fidelity Retirement Redefined, a new survey of more than 500 financial advisors and 500 pre-retirees and retirees who work with financial advisors.

The survey reveals that advisors who provide comprehensive retirement income planning -- specifically, written, detailed plans -- generally receive higher satisfaction, referrals and, ultimately, higher concentrations of client assets.

Yet, despite this correlation and the fact that eight in 10 pre-retirees (81 percent) think a detailed plan is important, only 18 percent of pre-retirees who work with advisors have retirement income plans and of those, only half (53 percent) have written, detailed plans.

"Our survey found that advisors face a range of challenges that can make 'writing a retirement income plan' feel extremely complex -- and for that reason, many are opting for more informal planning processes," said Larry Sinsimer, senior vice president, practice management for Fidelity Investments Institutional Services Company, Inc. "Yet, investors are telling us that those advisors who can help them address the complexities of retirement planning -- in writing -- will secure their loyalty, referrals and business."

With nearly 3 million Baby Boomers turning 65 this year, the Retirement Redefined survey reveals insights that may help financial advisors assess how to make their retirement income planning processes more effective and potentially more profitable.

Simplified Planning

According to the new Fidelity survey, advisors report a number of reasons for why they may not provide written, detailed plans, including: difficulty in getting clients to focus on the future versus the present and the fact that in today's economic environment, plans may become obsolete too quickly. Yet the survey also finds that written, detailed plans may help to:

• Drive satisfaction -- Those investors who had written, detailed retirement income plans reported the highest levels of satisfaction with their advisors. Sixty-three percent of pre-retirees who reported having written, detailed retirement income plans said they were "very satisfied" with their advisors; that percentage grew to 69 percent for retirees.
• Result in clients concentrating assets -- Investors who reported being "very satisfied" with how their advisor is handling their retirement income plans consolidated more assets with them. "Very satisfied" pre-retirees consolidated 72 percent of their savings and investments with their primary advisor and "very satisfied" retirees consolidated 81 percent of their assets.
• Generate referrals -- Seventy-nine percent of pre-retirees and 83 percent of retirees who reported being "very satisfied" with their how their advisor is handling the development of their retirement income plans have referred business.

Staying on Plan

According to the survey, once retirees develop their income plans, they have the best intentions to follow them -- 80 percent of retirees say they would follow at least some of their plan.

Yet, advisors report facing a range of challenges with many of their retired clients that could derail retirees' efforts to stay on their plans:

• Spousal Misalignment -- A lack of alignment between spouses on the goals, objectives and requirements for success of their retirement income plan
• Familial Support -- Clients are providing financial support to family members, which may put their own financial well-being at risk
• Lifestyle -- Many are retiring without a plan for how they want to spend their time; as a result, they are having to budget for unplanned activities
• Attachment -- Clients are unwilling to tap certain assets, such as inheritances, due to a strong emotional attachment
• Number numbness -- Clients have been barraged during the accumulation phase to focus on "the number" and may enter retirement looking at their savings as a "pile of cash" to share with family vs. their source of lifetime income

These issues underlie a changing face of retirees. "Modern" retirees, as dubbed in the study, are more responsible for funding their retirement with a defined contribution plan, such as a 401k. This group may also be characterized as having children later in life, divorced and/or remarried, carrying a mortgage into retirement and considering retirement an active time in which they will slowly transition to not working.

The study found that retirees may be identical by age but totally different when it comes to their individual retirement planning needs. For that reason, retirement income planning has evolved from an age- or asset-based process to one that has many nuances, requiring highly personal discussions about spousal alignment, lifestyle and familial commitments.

From Tools to Techniques -- Having Effective Conversations

Despite the nature of the challenges advisors face, most are relying on traditional financial models to aid them in their retirement income planning discussions. According to the survey, 88 percent use probability models and 76 percent use graphs/charts with historical trends.

While 76 percent of investors rate probability models as effective, many advisors note that they now are finding themselves in more of a "life coach" situation in which models don't enhance planning discussions. Advisors reported that conversation techniques, such as storytelling and re-framing the discussion, are more impactful.

Advisors Have an Unprecedented Opportunity

"Investors are looking to simplify in retirement and part of that means consolidating the number of advisors with whom they are working," said Sinsimer. "Retirement assets are going to flow to the advisor with the credible solution for retirement income planning, which does not have to be a complicated solution. Advisors today should be focused on how they are going to leverage written income plans to become their client's primary, most trusted advisor prior to and throughout retirement."

Findings and best practices derived from Fidelity Retirement Redefined will be presented through a new practice management insight series comprising in-person client workshops and webinars. In order to provide advisors actionable insights to help build -- and potentially redefine -- their retirement practices, Fidelity will introduce new modules throughout 2011. The Fidelity Retirement Redefined Study is available at www.advisor.fidelity.com/retirementincome. Advisors also can contact their Fidelity representative for more information about the practice management insight series and tools to help them with their retirement income planning.

About Fidelity Retirement Redefined

Since 2004, Fidelity has been conducting proprietary research into industry trends and practice management processes, and has been sharing this insight with advisors to develop more than three-quarters of a million retirement income plans. The Fidelity Retirement Redefined Study includes focus groups with more than 75 advisors and two primary research studies. The Fidelity Advisor 2010 Survey of Investors at Retirement (July 2010) was conducted by NFO Research on behalf of Fidelity Investments. This survey included 504 investors between the ages of 55 and 70 with investable assets of $250,000 or more, and has a margin of error of +/- 2.2% at 90%; +/- 4.4% at 95%confidence level.

The Fidelity Advisor 2010 Survey of Advisors on Retirement Income (August 2010) was conducted by NFO Research on behalf of Fidelity Investments. This survey included 527 financial advisors with at least 10% of clients who have retired in the last 10 years, and has a margin of error of +/- 2.2% at 90%; +/- 4.3% at 95% confidence level.

About Fidelity Investments Institutional Services Company

Fidelity Investments Institutional Services Company provides investment management services through investment professionals at financial institutions nationwide, including wirehouses, regional and independent broker/dealers, banks, trust companies and insurance companies. The company offers Fidelity Advisor Funds®, Variable Insurance Product (VIP) Portfolios, institutional money market funds, 529 plans and a comprehensive line of retirement products and services, including the Fidelity Advisor 401k. For more information, advisors may visit https://advisor.fidelity.com.

About Fidelity Investments®

Fidelity Investments is one of the world's largest providers of financial services, with assets under administration of $3.7 trillion, including managed assets of more than $1.6 trillion, as of May 31, 2011. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

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