According to the India Retirement Study conducted by KANTAR, a marketing data and analytics company, India’s retirement index stood at a mere 44% on a scale to 100. The study further stated that over 59% of respondents agreed they would have exhausted their savings by retirement with emotional preparedness also decreasing considerably from 64% to 59%. 

It infers that a large chunk of India is still extremely laid back about retirement planning with a significant dependency on family and relatives for retirement support. As financial advisors, this is an opportune time for you to come into the picture and educate your clients about the importance of retirement planning and why it has to be taken care of as a priority.  

In the last few years, social media and other digital platforms have drawn much-needed attention to financial goal setting and retirement. However, no matter how much information is available at the click of a button, the importance of a financial advisor who counsels clients about the benefits of having a life insurance plan in their retirement strategy is undisputed. 

With the emergence of newer, technologically enabled financial products and large-scale awareness about ‘future proofing’ one’s life, when a client thinks of retirement planning, financial advisors are likely to be the first people they will look to for advice, guidance, and a concrete retirement plan.  

Here are a few simple steps that advisors can take to ensure they have adequately prepared their clients for retirement planning.  

Know your client to formulate a strategy 

As an advisor, it is imperative for you to ask the relevant questions to correctly estimate an average monthly sum that your client requires. You need to pose quantifiable queries to the client to clearly understand current and future priorities, establishing the financial capability today to map it against a realistic future tomorrow. Keeping that in mind, the next inquiry, should be on the future goals and lifestyle that the client may have envisioned for themselves. This will be helpful in formulating the final strategy that you may suggest to the client.    

In addition to a smooth retirement, as a financial advisor, you must also simultaneously work on a strategy that ensures that all of your client’s future goals and responsibilities are taken care of. In quantifiable terms, you need to ask and assess whether these goals entail buying a property or securing funds for other beneficiaries, or any other such defined financial goals. “If you are not able to sustain today for just six months without any income, it is important to think about how you will sustain with a permanent pay cut after 60. Hence, early retirement planning is crucial from the time you get your first pay cheque.” said Vikas Jethwani, a five-year MDRT member from Mumbai, India. 

Once you have an idea of this ballpark figure, as an advisor, you must review their current portfolio and sensitize your clients about any changes in lifestyle, if required. You need to guide the client on how to make space for life insurance in their retirement strategy, for example discussing expenses, you need to conclusively inform the trade-offs of lifestyle changes with the short-term impact today, to the advantages in the future, and put forth your queries to the client to assess a realistic and optimum plan for the client. Further, you must also educate your clients about the most suitable life insurance products that can help secure the interests of their beneficiaries as well. 

Suggest the most appropriate life insurance policy 

There is no single solution to all clients. As a financial advisor, you should assess each situation based on the needs of the client, as there are various types of life insurance policies. This would include asking the client about the affordability of the premium for all such plans. Once you have a clear picture of your client’s current and future priorities you must choose the most suitable policy for them.  

For example, several life insurance policies in India come with different factors such as duration, taxation and maturity benefits. For example, a term insurance which comes with a fixed term of 10, 20 or 30 years and minimal retirement benefits is the cheapest and most popular form of life insurance policy in India, and therefore might be the most popular, but you need to assess if this is the optimum plan for your client, with their individual financial means. 

Plan for taxes 

Any retirement planning that involves getting a fixed sum of money monthly or getting a lump sum altogether will be liable to taxes prescribed by the government. As a financial advisor, you should have the foresight to suggest a strategy to ensure these taxes are minimum. You need to discuss with your client, the viability of the suggested strategy to see that it is not a burden today, nor does it become a burden at retirement. It is essential that you plan and prepare your clients in a way to ensure that on retirement they can take maximum advantage of all the tax provisions provided in the income tax laws.  

This can be done by investing clients’ money in life insurance products that provide maximum tax benefits like retirement insurance policy, whole life insurance policy, Unit Linked Insurance Policy (U-LIPs) or others. 

Track the progress 

Once the plan is set, you must consistently track its progress to see if your insurance company and policy is performing as per expectations, especially for market linked life insurance policies. From time to time, it is also prudent to revisit your client’s lifestyle and priorities to see if it aligns with the life insurance products they have purchased. It is essential to pose questions to the client on the adherence to suggested lifestyle to ensure a streamlined experience.  If required, you should take necessary checks and balances to ensure that your clients’ retirement plan is relevant at all times. 

In the words of Jethwani, a proactive approach is better than a reactive one here. Advisors should routinely sit with their client and take a stock of any changes in their plans and goals to see if their retirement plan needs any realignment. “Priorities change with every new member in the house, or every new job. The client is not going to talk about unless you specifically ask. Thus, frequent discussions about their jobs and future plans helps in Maturity Chart Mapping to ensure client interests are protected,” he adds.   

Lastly, advisors should also touch upon subjects such as estate planning and long-term care insurance as an added layer of protection to an existing retirement plan. 

Contact: MDRTeditorial@teamlewis.com