On Wall Street magazine recently called together seven of the top professionals in the market for our Retirement Roundtable to talk about the challenges and opportunities facing the industry. We discussed some of the shortcomings in this market (nobody knows what inflation rate to use); some of the psychological issues involved (framing a discussion); the general lack of financial education; and whether investors trust Wall Street. Here are excerpts from the conversation.

Roundtable Attendees:

Robert Seaberg, managing director, Global Wealth Planning, Global Wealth Advisory Services, Citigroup;
John Diehl, senior vice president, Retirement & Wealth Consulting Group, Hartford Life;
Ed O'Connor, managing director, Retirement Consulting Services, UBS;
Jim McCarthy, managing director and head of Retirement & Equity Solutions, Morgan Stanley;
Aimee DeCamillo, managing director, Retirement Group, Merrill Lynch;
John Papadopulos, president, Retirement and Investment Products Group, Wachovia;
Steven Geisert, vice president, Retirement Programs, Goldman Sachs Asset Management.

Lee Conrad, Managing Editor for On Wall Street: What are the two biggest issues right now facing the industry and your company regarding retirement?

JIM McCARTHY: Short-term, I think the biggest issues are taking an industry model that is financially and investment-focused, and transforming that into one that's more outcome-focused and goal-focused. In the short to medium-term, the servicing aspect of the distribution phase is much more intense. So while I might be able to have relationships with 500 or 1,000 clients that I'm investing for [in the accumulation phase], when it comes to setting up the income streams, each client requires more time.

AIMEE DeCAMILLO: I would say short-term it's the environment. It's a big challenge for advisors and for our industry in general, making sure that we have proactive outreach to clients, and then delivering innovative solutions that are going to meet their needs and put them at ease. Long-term, I think it's this mindset shift that advisors are going to have to go through as harvesting those assets becomes a primary goal for baby boomers, which is a very different group from the previous generation that advisors are more used to working with.

ED O'CONNOR: Similar to what Aimee and Jim said, in the short-term, it's the decumulation of retirement assets. More and more, I look at my firm and everything we do, our DNA, is about wealth building-every new product, new concept and new financial planning tool. The bias is toward showing all those classic mountain graphs. But we're starting to challenge ourselves more: stress test that idea, put some withdrawal rates against it, show the sustainability. The real long-term issue comes from 401(k)s. We all know defined contribution is becoming the primary source of people's retirement over the next 20 to 30 years and the more we can do to make that a more sound system, to make more participants save enough for retirement, I think that's going to be the challenge.

STEVEN GEISERT: As an asset manager, I think we have a somewhat different take on this. Certainly, we're trying to build things that the advisor community can use. I think that the two challenges kind of break between the defined contribution/401(k) world and the IRA world. If you look at the defined contribution space, I think the next generation of what we have to build is kind of 2.0 in target date environments. How do we start to have a defined contribution...so that people are going to have an income source when we get to retirement? And what do we have to build from a core menu, from a target date menu? What solutions can we put in place to help meet those needs?

ROBERT SEABERG: Picking up on Ed's comments, I think the significant concern with the move to decumulation is building an adequate framework in which advisors can position and present those products in a logical and sensible way. They need to make sense to the people who need to use them. The first eight years of this century have seen two once-in-a-generation events. We start with three negative years in the equity markets, which had not been seen since 1939, 1940 and 1941. And then we had the greatest credit liquidity crisis since the Great Depression. These are things that most advisors have never seen in their careers, or even their lives. The second issue is an ongoing concern for non-retirees and retirees alike, and [it involves tending to client relationships]. Because you can't really do a very good job, even if we create marvelous contexts and frameworks, if you don't understand who and what your clients are. We're in the middle of a paradigm shift, but we've got a long way to go yet.