This is sponsored content submitted by Sun Life Financial. Michael Banham, Vice-President Wealth Distribution at Sun Life Financial, explains how creating a retirement income is a combination of art and science.

I’m just going to come right out and say it – unless you’re staying ahead of the curve with a proactive approach, you can’t expect all of your current clients to stick with you into their retirement years. It’s not a given. While 91% of Canadians plan on having an advisor help them when they reach retirement,1 it may not be the same advisor they worked with during their accumulation years.2 But, there’s an opportunity for you. Generally speaking, people are searching for advisors who can help them put their retirement income plan together in an efficient way. Some are looking to their current advisor and not getting the answers they want. They’re frustrated and searching for help. In other words, potential clients are looking for you.

While accumulating savings for retirement can be challenging, “decumulating” in retirement can be even more complex. Creating a retirement income plan is a combination of both art and science. It starts with asking the right questions to help clients think about their retirement plans and needs. From there, it’s about choreographing –getting the right balance of products, plans and strategies working together to contribute income at the right time during retirement for each individual client.

The challenge? How can you predict all of the elements that contribute to a retirement income plan to make sure your clients have the right level of income for life – that lets them live the kind of retirement they really want? Factors such as how long they’ll live and potential market returns are unpredictable – but play a key role in their decision making.

It’s important to seize the opportunity to help (and keep) your clients – for life.

Over the next 20 years 6 million boomer households will convert assets into retirement income

As we all know, the number of retirees is increasing every year; 1,000+ boomers in Canada will continue to turn age 65 each day for the next 15 years.3 This number is expected to increase to 1,400 a day by 2021, and remain true until 2029 when the youngest boomers reach 65.4 This means that over the next 2 decades, 6 million boomer households will turn 65. These boomers will need to convert assets into retirement income.5 That’s a tremendous opportunity and duty.

This shift from accumulation to retirement income will not only impact our economy, but our society.6 You have the unique opportunity to serve current and prospective clients through this change. And 27% of Canadians are in need (or will be) of a retirement income plan.7 Clients are looking for you, their trusted advisor, to help them transition into retirement with confidence, and your advice is vital; 76% of retirees who work with an advisor are satisfied with their retirement savings.8

Now’s the time to give personal and specific — not prescriptive — advice

Shifting from a making money mind set to a spending money mind set is a change that many clients struggle with – and there’s potential to get it wrong. As Wade D. Pfau, PhD, CFA, Professor of Retirement Income at The American College says, spending strategies seem to be in a range of two extremes: 1) “spending a constant amount from the portfolio each year without regard for the remaining portfolio balance,” and 2) “spending a fixed percentage of the remaining portfolio balance”9 – and potentially missing out. In retirement, spending (and living well) and not running out of money is a balancing act.

Retirement income planning is a great opportunity for your relationships with clients, but not many advisors are doing it well, for many reasons – mostly because of its complexity. Retirement income planning needs to be addressed in a comprehensive way; it’s a time where people need personal and specific advice – not prescriptive advice.

Each client will likely have 2 main goals for their retirement income plan: 1) tax efficiency and 2) income protection for living a long life. A careful, multi-product plan can help meet these goals – but no two solutions are the same; as clients age, they’ll need different solutions to cover their changing needs. The combination of products used to get them to retirement may not be the same combination used in retirement.

So, why do retirees need a written retirement income plan? Firstly, it provides a clear view and understanding to address a clients’ anxiety about the shift from saving to spending. Secondly, a plan coordinates household income streams and can highlight existing inefficiencies. And finally, it can show and address investment strategies, health risk and wealth transfer issues, as well as tax implications.

You’ll have to make assumptions and projections over an extended period of time – it’s true. But by looking in detail at the use of personal assets and benefits to create the cash flow they want, you can help clients assess their retirement income possibilities. This will involve a combination of strategies, specific tools and multiple products. The last thing you want is for a client to retire into a situation where their income doesn’t match their long-term spending.

Smart, dependable solutions — guaranteed

An overwhelming majority of Canadians want some of their retirement income guaranteed,10 but many don’t know the best way to get it.

Only 26% of Canadians are familiar with segregated fund products, just under half (48%) are familiar with income annuities11 and only 16% expect to receive retirement income from life annuities.12 More people need to know they have choice when it comes to guaranteed products in retirement.

Clearly, educating clients is key. They need to know it’s critical to stay invested, but also understand the power of guarantees. Show them how incorporating a guaranteed solution in their investment portfolio, which should also include mutual funds, can help them reach their goals. As part of a retirement income plan, segregated fund products and life annuities provide benefits, only available from insurance companies – and in Sun Life’s case, backed by 150 years of risk management expertise. As their trusted advisor, there’s an opportunity for you to help clients weather rough markets and stay focused on their retirement savings goal.

The art of the conversation

Planning for income in retirement is truly a marriage of art and science; and when done right, will serve your client’s individual needs. Sun Life Financial has what you need to help. I encourage you to contact a member of your Sun Life Wealth Sales team to talk more about the art of retirement income planning.

You might also like…

1 PMG Intelligence, Canadian Boomer and the New Retirement, 2009

2 PMG Intelligence, Changing the Game, 2011

3 Stats Canada, Canada’s Population Estimates, 2012

4 Estimates of Population, Stats Canada data, 2014

5 Investor Economics, 2013 Household Balance Sheet Report


7 2013 Sun Life Canadian Unretirement Index

8 2016 Sun Life Retirement Now Special Report

9 Pfau, Wade D. PhD, CFA, Making Sense of Variable Spending Strategies for Retirees, March 2015

10 98% of Canadians surveyed want some of their retirement income guaranteed, according to the 2015 Canadian Unretirement Index.

11 CANNEX/Greenwald & Associates, Canadian Guaranteed Lifetime Income Study (GLIS), August 2015

12 Canadian GLI Study, September 2015

Mike Banham is Vice-President, Wealth Distribution, and a member of the Sun Life Global Investments Canada Leadership Team.

Mr. Banham is accountable for leading the growth of retail wealth sales for Sun Life Financial in Canada. He and his team work with advisors to support the development of their business leveraging the broader Sun Life Financial platform, including mutual funds from Sun Life Global Investments (Canada) Inc., segregated fund contracts and guaranteed wealth products issued by Sun Life Assurance Company of Canada, and trust products issued by Sun Life Financial Trust Inc.

Mr. Banham joined Sun Life in 1987 and has since held various senior leadership roles in Individual Wealth Management. Before his appointment as Vice-President, Wealth Distribution, he was Chief Operating Officer for Sun Life Global Investments where he was instrumental in launching the Sun Life Global Investments mutual funds.

Mr. Banham is a past director for the Investment Fund Institute of Canada. He holds an Honours Business Administration degree from Wilfrid Laurier University, Waterloo, Ontario, and has a Certified Management Accountant designation from the Canadian Society of Management Accountants.