Canadians are enjoying longer retirements and the post-retirement part of their financial plans needs to reflect that fact. This growing need for long-term retirement income is creating opportunities for conscientious advisors to become leaders in the growing field of retirement income planning.
As more boomers enter retirement, the opportunity for advisors to make this segment one that accounts for a significant portion of their business is becoming increasingly apparent. But with the markets more complex and volatile today than they were for previous generations, what tools and products can brokers utilize to help aging clients build a sustainable retirement income?
CANNEX’s Product Allocation for Retirement Income tool (PrARI) can help an advisor hedge the financial risks faced by retirees by allocating savings across a variety of investment and insurance based products. PrARI enables advisors to determine whether or not a client’s desired income stream is likely to be sustainable over their lifetime and to estimate the size of the client’s expected financial legacy.
“PrARI enables advisors to show their clients an efficient frontier,” explains Lowell Aronoff, CEO of CANNEX Financial Exchanges Ltd. “In the same way that the Markowitz Efficient Frontier helps you choose the make-up of your client’s portfolio based on their risk profile, PrARI helps the advisor determine what portion of the portfolio should be allocated to managed funds, annuities and living benefits based on whether they are more interested in a higher lifetime income or a larger financial legacy.”
CANNEX has other calculators to help advisors explain the advantages and trade-offs of annuities. One calculator enables advisors to see how much extra yearly income a client can generate by buying an annuity compared with a common 4% withdrawal strategy, and the impact that this purchase might have on the client’s financial legacy. This tool is available in the form of a customized marketing video that advisors can use in presentations to clients. Advisors are able to tailor visual content for every client by populating the video with data specific to the needs of their client.
Two other essential tools enable advisors to help explain the yield from an annuity. One shows and explains its Internal Rate of Return (IRR); while another introduces a new metric, the Implied Longevity Yield (ILY). The ILY measures the yield a client would need to receive from an alternative investment in order to keep up with the income generated from an annuity. This plays a crucial role in helping the advisor decide whether a retiree should buy an income annuity today or wait, take advantage of the fact that annuities are cheaper for older people, and use a systematic withdrawal plan to provide income in the meantime.
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CANNEX Financial Exchanges Limited is a privately held Canadian company that has provided data and information services to the financial services industries in Canada since 1983 and the United States since 1996.