Today’s investor has an average of 3.6 relationships with financial services providers.1 While diversifying among asset classes is one of the best decisions investors can make, many clients mistakenly think that diversifying across financial advisors is also a good strategy. Unfortunately, this tactic can prevent clients from understanding their full financial picture. Giving clients a clear and concise roadmap for their retirement income needs can help establish you as the retirement expert in your community, and it can help clients make better decisions about their future. We think an income plan can help you illustrate to your clients the value of consolidating their assets with one trusted advisor.

Why Income Planning and Why Do It Now?

One of the basic tenets of behavioral economics is that investors have the ability to make better decisions when planning for their future than they do when making decisions in the here-and-now. In one classic study, participants were asked whether they would choose to eat a banana or a chocolate bar at a later date in the future, such as next week. When presented with the choice of a healthy option or an unhealthy option, 70% said they would choose the banana. However, when presented with the option of choosing a banana versus a chocolate bar today, 70% of participants chose the chocolate.

“The same psychology works in finance. When faced with a future choice, we generally select a smarter option, such as savings, while an immediate choice triggers the pleasure of spending. The science is clear. Brain scans show that the emotional and logical areas of our brains wrestle over immediate decisions, but our logical bits rule when considering our future well-being.”2