Income planning is not easy

By Scott Wheeler


History is replete with scary duos -- King Kong vs. Godzilla; Dr Jekyll and Mr. Hyde -- but a new threat on that list is Confusion and Indecision. It doesn't take a genius to take something complicated and keep it that way. Very few care enough to make it simple to understand and remember. The reason for that is because it's a lot of work.

Consider this: By and large, people remember events and information using pictures. Most access information from the past through visual cues -- they see it in their mind's eye. This can be easily noticed when after asking someone to remember an event from their past, they look up. They're accessing information (a memory) visually. So it just goes to show that if you can utilize pictures and drawings in presenting concepts, you will go a long way toward helping people remember the information later on.

As the legendary Green Bay Packers coach Vince Lombardi famously quipped, "It's hard to be aggressive when you're confused." There's also a corollary to that -- it's hard to be decisive when you are confused. To give you the best chance of affecting someone's behavior you must keep it simple -- and as an added benefit find a way to use pictures!

Planning for income for the rest of someone's life is not to be taken lightly. As many advisors have experienced, this exercise is wrought with issues and pitfalls, including (but not limited to) qualified vs. nonqualified funds, 401(k)s, IRAs and Roth IRAs, tax law, withdrawal platform vs. annuitization, income benefit riders, senior health issues, etc.

Income mapping benefits are many

The advisors we work with have come to believe that the very best way to help their clients develop, understand and remember their income strategy is to utilize simple pictures and flowcharts. In essence, that's income mapping. Look at the benefits of this simple, but effective approach:
  • Straight-forward, easy to understand
  • It gives you something you can get excited about
  • It's based on a picture, so it's easy to recall
  • Shows entire plan as it was designed to unfold
  • Every dollar is accounted for
  • Easily updated during annual reviews, etc.
A work in process

Mapping your client's income starts the same way other methods do --with seeking to answer various questions pertaining to the situation at hand, such as the type of money involved, how much, ages, health, plans, dreams, children, overall assets, liabilities, etc.

I have tried many, many fact finders and questionnaires. What I've found is that each of these tools has some good points and some bad points. I ended up creating my own from many, and it's the one that most of our advisors find to be the best balance between containing enough of the right information to start the mapping process, but not so much that it impedes the start of the process.

Militaristically, no battle plan survives engagement with the enemy. Likewise, very few initial income maps remain the same throughout the planning process - inevitably changes are made due to other money being disclosed by the client and or changes in assumptions. Once a map is presented and the basic tenets are understood, and more importantly, remembered by the client, any adjustments that are a part of the normal process are more easily assimilated by the client.

A good bit of confusion and indecision can occur throughout the guaranteed income planning exercise when there is not a good solid understanding of where each dollar resides and the purpose each dollar plays in the overall plan. Income mapping allows the producer to achieve consensus on the basic flow and timing of every dollar. And as changes are introduced, clients will more readily understand the impact to the plan limiting any confusion and indecision.

In using my income mapping system, it is not uncommon for me to go through three or even more iterations of the overall income plan, as suggestions and ideas flow from the advisor and or client. By starting with a strong visual and scaling it up in complexity, everyone enjoys the exercise -- including the clients.

Customized, hand-crafted designs

It's not uncommon to value something that is hand-crafted (like a piece of fine furniture) more than an item created through a "cookie-cutter" process. It's expected the item will fit together better and reflect who we are better, so we place more value on it. We have found that advisors and their clients come to the same conclusion when they experience this same distinction within the income planning process.

If you are in need of professional-grade income case design -- from the questions to ask to the final presentation of the plan -- try working with your marketing organization. I think you will agree that the best way to income plan is not to. Just let a team of experts do it for you.

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