Dana Anspach, CFP®, RMA®, founder of Sensible Money, LLC and About.com’s MoneyOver55 expert since 2008, shares excerpts from a recent newsletter to her clients about the differentiating value of the Retirement Management Analyst® (RMA®) designation.
If you were thinking about competing in a race, perhaps a one mile run, it would be pretty easy to know if you were ready. You would have the times of the best one-milers, and the times of those in your age group and class-type to measure against as you were training. It would be easy to know if you had a chance at winning, or at least of performing acceptably well.
But what about retirement? How do you know if you’re on track? And once you’re in the race, how do you know how well you are doing?
The only competitor in the retirement race is you and your desired standard of living. Although there are no outside competitors, the stakes are high. Your future well-being is on the line.
Would you believe there are no industry-wide standards that allow you to see if you’re on track? It’s like the Wild West out there, with each financial advisor using their own set of assumptions. Numerous studies* have shown that online retirement calculators and software programs can give you vastly different answers as to how well-prepared you are for retirement. And, large financial services companies and brokerage firms face big challenges to ensure that the advice given by their advisers follows a set of standards.
So what do we at Sensible Money do to solve this problem? How do we make sure clients receive a consistent answer as to how well prepared they are and how well they are doing while in the race?
Lots of things. First, all our planners are Certified Financial Planners® (CFP®). That’s a good start – it provides a process to follow to gather and analyze data. But it is not quite enough.
In addition, any planner who works with someone near retirement holds a secondary designation of Retirement Management Analyst. Not a lot of people have this designation (perhaps a few hundred in the entire country) but that may change soon.
Why would it change? In looking at how to make sure financial planners consistently come up with recommendations that are in the best interest of the client, one industry expert, Michael Kitces, recently considered the CFP standards. In a July 25 article he said, “A better alternative may be the Practice Standards associated with the Retirement Income Industry Association® (RIIA®) and their Retirement Management Analyst (RMA) certification…” (see full article here).
At Sensible Money, our entire process is built on the framework taught by the RMA. This is important because each year, as we update a client’s plan, we use a consistent process that allows us to tell if our clients are now more prepared for retirement or less prepared. We have a consistent measuring process to use.
And once in retirement, we continue to update the plan using that same process. We can tell how well you are doing in the race. This is critical, because if you are only a few miles (years) along, you have time to make changes if you’re lagging behind.
At Sensible Money, it’s not the Wild West.
*Editor’s note: For more on this issue, read a recent News & Views which summarized the presentation made at RIIA’s Summer Conference.
To learn more about RIIA’s RMA designation, visit www.riia-usa.org’s “Become An RMA” section. The next class starts September 18th.