Advisors are moving away from the "buy and hold" philosophy of buying a hodge podge of stocks, mutual funds and bonds and holding them for a long time in hopes of making a lot of money. The last 12 years have proved that policy is a failed strategy for investment portfolios, especially if you're taking income from it, says Russ Brown, certified financial planner in Jackson, California.
What Brown prefers is using a strategy that uses actively managed assets as well as income producing assets, such as fixed annuities. Income planning is a big topic Brown uses when speaking with his clients. As pension plans are a thing of the past unless you're a government employee, he's having to show people how to create their own pension plans with things like annuities and guaranteed income products. He is also showing them how to maximize their social security benefits with claiming strategies.
Brown says there are three main advantages to working with a certified financial planner. A CFP has a fiduciary responsibility to the client, by putting their needs ahead. The knowledge and training a CFP goes through to achieve the CFP designation is very rigorous, culminating with a 2 day exam, similar to a lawyer's bar exam. Lastly, because CFP's are well-versed in all things in the financial world, they take a holistic approach in getting the best plan for the client.
As running out of money during their retirement years is the number one fear of retirees, Brown advises his clients about annuities, which are a great source of income stream and can also provide guarantees against inflation. By having annuities in the portfolio, Brown says he can get more aggressive on the equity side of the investments.