Despite one of the worst performances on record by the bond market last year, fixed income remains a centerpiece of retirement portfolios.
On that note, active bond managers such as PIMCO, are important partners for advisors looking to shore up fixed income offerings for clients nearing retirement and those already. Those partnerships are all the more vital following eight interest rate increases by the Federal Reserve dating back to the start of 2022.
“One of the most important goals for investors facing retirement is the comfort of knowing that they can sustain their desired level of spending throughout their lives, without the fear of running out of money. PIMCO's retirement framework seeks to provide advisors and investors a simple way to approach retirement investing and aims to address the desire for both predictable income and long term growth — without giving up control or the ability to change course,” according to the California-based fixed income manager.
PIMCO is one of the largest assets managers in the world and while the firm is often associated with being one of the dominant money managers for pensions and other high-level clients, it also has a broad suite of offerings applicable to financial advisors.
PIMCO Perks for Retirement Planning
Due to its vast fixed income expertise, PIMCO can assist advisors with a variety of bond strategies relevant to retirees, including laddering. As advisors know, laddering can offer clients a variety of maturities under the umbrella of one portfolio that can extend income consistency over retirement.
“As investors enter retirement they may wonder how they might replace all or a portion of what their paycheck provided with a new source of predictable income,” adds PIMCO. “Market volatility can make it difficult to maintain steady investment income in retirement. And much of the traditional thinking on how to best replace income can be confusing. Our framework offers a simple approach.”
Think of laddering as a bespoke strategy on the bond front, but the rub is it can be difficult for advisors to implement on their own. Hence, the value in a partner such as PIMCO. Moreover, the money manager can assist advisors looking to meet clients decumulation needs, which are likely elevated today due to coronavirus pandemic shocks and multi-decade high inflation.
“But decumulation is hard because it is a literal crux: It is both the solution most in demand and the problem the industry has been least able to solve. Nearly 60% of individuals with advisors lack a retirement income plan (the number rises to over 80% for those without an advisor), according to Cerulli,” notes PIMCO in a thought leadership piece. “And our research finds that the area where advisors feel the least confidence is in their ability to formulate and implement strategies that seek to provide a predictable, tax-aware stream of income and liquidity in retirement.”
PIMCO Behavioral Insight Valuable, Too
Behavioral finance is new territory for some advisors, but it’s a space worth venturing into as part of broader client relationship-building efforts. PIMCO offers advisors a raft of resources on this front – a tangible benefit as client bases grow increasingly sophisticated.
Behavioral finance is a topic of particular relevance to retirees because it addresses issues such as aversion bias, risk-taking and spending, among others. Also vital are the motives clients have working with advisors regarding retirement.
“Investors’ behavioral biases are akin to a finely strung musical instrument: One string out of tune affects all strings. As with Bach’s ‘Well-Tempered Clavier,’ it’s critical to understand and seek to fine-tune an investor’s underlying ‘heartstrings,’” observes PIMCO. “Achieving harmony of intent and outcome is central to goals-based retirement planning. Indeed, client peace of mind may be the highest goal of any retirement advisor.”
Bottom line: Partners matter and PIMCO is a viable one for advisors looking to bolster retirement planning services.
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