After he spent some time reviewing his own retirement plan, Financial Planning Senior Editor Charles Paikert noted that interest rates, a historic pillar of income, had fallen to all-time lows, and the prospect for an uptick anytime soon appeared remote.
What does this portend for clients, he wondered, given that many had expected yields to offer a small, but dependable, income stream? And what does it mean for planners, who must also readjust their portfolio recommendations?
When he started speaking to advisers, Paikert tells me he was surprised they were so calm. While it’s not yet a crisis, the “combination of low rates, increasing longevity and lack of savings and pensions is a witches brew,” he says. They need to be better about “dampening clients’ expectations of what returns on investments will be in retirement.”
Advisers should also “be upfront with clients about what’s going on with regard to current thinking on interest rates, since they don’t appear to be going up anytime soon,” he says.
New to Financial Planning this month is the first piece in an occasional series, “Should I …”. In it, we examine a single dilemma that impacts any practice. In “Should I Raise my Fees?” contributing writer Ingrid Case helps advisers determine whether raising their fees — or lowering them — is a good move.
In her research, she “was sorry to hear how many clients and potential clients are willing to take advantage of planners’ time and effort. Someone can already be getting a deal and a half and still press for more,” she tells me. “But there are people out there who want your services and will pay you fairly. Go forth in confidence that you will find them.”
After the extra time some advisers are spending on helping clients make up the steady income lost when interest rates fell to the basement, it may well be time to ask themselves if a rate increase is in order.