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From Resource,
September 2008
Boomers
on Board
Financial
services companies are meeting the challenges of a bear market, new regulations,
and vanishing employee benefits to protect the retirement assets
of the Baby Boomers. Here’s a look at who’s doing what—and why.
By
Jennifer C. Rankin
The
American Baby Boomers are on the move again.
The
leading-edge Boomers, born between 1946 and 1955, started their journey pulling
Radio Flyer wagons and riding in their parents’ Woody wagons, then steered
their way to independence in Volkswagens. The trailing-edge Boomers, born
between 1956 and 1964, added inline skates and SUVs to the mix. Now they’re
all cruising
toward retirement.
Resource
has been following the Boomers for some time (see Forever Young, April 2006 and
Building a Better Retirement, April 2007). During the past 18 months, new
products, new trends and issues, and new legislation have entered the picture.
What
options do Americans have to fund their retirements? In 2004, a lucky 28 percent
of those with jobs enjoyed the security of both a defined benefit (DB)
plan—that is, a pension fully funded by their employers—and a defined
contribution (DC) plan, according to the Center for Retirement Research at
Boston College. Sixty-one percent had access just to a defined contribution
plan, while 11 percent had only a defined benefit plan.
Outside
of the workplace, insurance companies, banks and fund companies offer a wide
variety of individual retirement accounts (IRAs) and annuities.
For
financial services companies, the retirement game is about asset capture from
accumulation (saving) to decumulation (spending in retirement). Along the way
there can be rollovers of DC plan savings from one employer to another or from
an employer to an individual qualified plan. Employees with a DB plan must
decide if they want to keep their savings with their group provider or take it
with them. Retirement assets, then, can be in play several times over a
person’s lifetime.
The
amount of money at stake is
staggering. Consider these facts:
*
According to McKinsey & Co., DC plan assets from 401(k)s and 403(b)s,
their non-profit counterparts, are projected to grow to US$ 8.5 trillion by 2015
from roughly US$ 3 trillion at year-end 2007.
*
According to the Department of Labor, there are 635,567 401(k) retirement
plans in the
U.S.
, covering almost 64 million total participants (52 million active).
*
According to TowerGroup, retirement assets in various plan types under
the control of individual investors in the
U.S.
total US$ 9 trillion, with liquidation over the next decade possibly placing
another US$ 10 trillion on the table.
Even
though the advertising campaigns of financial services companies and the
lion’s share of media attention target income generation, forward-thinking
companies are working hard to cement consumer relationships during the asset
accumulation phase as well. Why? Well, the youngest Boomers will be saving for
retirement for another 20+ years. And many of the oldest Boomers will continue
to work, especially if the economy doesn’t turn around. Still, at the end of
the day, retirement assets must generate retirement income. And the challenges
inherent in creating that income will compel many
U.S.
households to consolidate assets with a single advisor. Companies that impress
the Boomers during accumulation will be first in line to help them when they
retire.
Unfortunately,
many seem to be missing a real opportunity to capture assets.
In
July, the Diversified Services Group (DSG) completed a major syndicated research
study—Capturing and
Retaining Rollover Assets at the Retirement Inflexion Point—for
which it conducted in-depth executive interviews of DC retirement plan providers
(financial services companies) and sponsors (employers).
The
study examines issues, opportunities and decisions during an employee’s
transition to retirement. The primary purpose of the research is to provide
important insights to firms seeking to improve their retention or acquisition of
retirement plan assets when the plan participant reaches retirement and makes a
decision on the placement of those assets.
The
findings are sobering:
*
Plan service providers are largely
unsuccessful at retaining assets due to insufficient focus on the retention
issue, the inability to reach the plan participant at the appropriate time, and
the inability to build a relationship with the participant prior to retirement.
*
The majority of employers do not care whether or not their participants
take assets out of the DC plan at the time of retirement. However, more than 80
percent of participants from the companies interviewed do, in fact, take their
assets at retirement.
*
Education at the work site continues to be focused almost exclusively on
accumulation of assets rather than on how to create income from retirement
assets.
*
Plan services providers continue to miss the opportunity to aggregate all
of a plan participant’s assets at the point
of retirement.
“Since
the majority of the firms we interviewed lost between US$ 500 million and US$ 4
billion of DC plan assets last year,” says James Sholder, a principle with
DSG’s retirement market practice, “it is certainly valuable to explore the
intricate interactions and relationships between the plan provider and the plan
sponsor and what initiatives can be taken to retain a significant portion of
these assets and client relationships.”
Risky Business
Capturing
rollover assets is just one of the challenges the retirement market poses and
many spin around the average American’s ability to stay afloat in retirement.
These challenges include a bear market, the slow demise of the DB plan, and
Americans tapping into their remaining retirement plans to stay afloat
financially.
Let’s
start with the economy.
All
but the most fiscally prudent Boomers are in a real financial pickle. For
starters, a prolonged bear market has eroded the value of their investments,
including those in their DC retirement plans.
In
addition, more than a few have used their homes—many of which were financed
with interest-only or variable mortgage products and have lost value—as giant
ATM machines. Over the past decade, they have refinanced multiple times to draw
out equity in order to fund renovations, vacations, cars, tuition and more. In
fact, rapidly rising equity was their major source of personal wealth. And many
were counting on that equity to partially fund their retirement by selling their
homes and investing the proceeds in equities and annuities or by keeping their
homes and taking out equity lines of credit or reverse mortgages.
A
new report from the Center for Economic and Policy Research (CEPR)—The
Housing Crash and the Retirement Prospects of Late Baby Boomers—shows
that, due to the collapse of the housing bubble, the vast majority of near
retirees have accumulated little or no wealth. The study analyzed the wealth
holdings of families headed by people between the ages of 45 and 54 in 2004 and
projected the wealth of these families in 2009.
“This
extraordinary destruction of wealth will have tremendous implications for
millions of families as they enter retirement,” says report co-author Dean
Baker. It also will have significant implications for financial services
companies. You can not spin an income stream from nothing.
These
economic woes have coincided with unraveling safety nets for the average
American, creating a potential perfect storm the Boomers have just begun to
weather. Employers continue to jettison employees to control costs. Employees
are paying more and more for their group health benefits. Everyone’s worried
about the viability of the Social Security program.
Another
concern is the slow demise of employer pension programs. From 1990 to 2006, plan
sponsors voluntarily terminated more than 61,000 sufficiently
funded single-employer DB plans, according to the U.S. Government
Accountability Office (GAO).
In
addition, growing numbers of Americans are resorting to pricey, often risky ways
to cope with today’s challenging economic environment, such as tapping life
insurance policies and 401(k) accounts to stay afloat financially.
This
has become such a problem that the Financial Industry Regulatory Authority (FINRA),
which just released a new investor alert—Weathering
Tough Financial Times: The Long Term Costs of Quick Cash—to caution
investors about endangering their home, their retirement saving or their life
insurance and to offer tips for maintaining financial stability.
Troubling
trends include individuals borrowing from or prematurely depleting their
retirement savings, especially through the relatively new 401(k) debit cards,
selling their life insurance policies at a discount in life settlement
transactions, and tapping into their home equity through reverse mortgages long
before retirement.
The
401(k) debit card is particularly disturbing. It lets plan participants borrow
from retirement savings and pay themselves back with interest over time, much
like a typical 401(k) loan does. But the card makes it much easier and has
become Public Enemy No. 1 with several
Washington
lawmakers, FINRA, advisors and brokers, and the financial institutions pushing
workers to save more for their futures. In July, Sens. Charles Schumer (D-N.Y.)
and Herb Kohl (D-Wis.) proposed legislation to outlaw them.
Hard Look
As
defined contribution plans become the de
facto retirement plan for average Americans, they—and U.S.
regulators, legislators, and policy wonks—are taking a hard look at just how
effective they will be at meeting retirement income needs. As a result,
discussions about fee disclosure/transparency have really heated up this year.
There
are many reasons 401(k) fees have become such a hot issue. For starters, fees
can place a huge drag on investment performance in the asset accumulation phase
of a person’s working life. And retirees who choose not to roll over their
401(k) accounts will feel the pinch of high fees as they create an income stream
by drawing down those assets.
The
U.S. Department of Labor (DOL) wants the estimated 65 million participants
covered by 401(k)-type plans to know what those fees are so they can make truly
informed retirement savings decisions. On July 22, the DOL proposed a regulation
that will give workers useful summary information, including fee and expense
information, for investment options available under their plans.
“Our
proposal is consistent with public consensus that workers need clear and concise
information—not dozens of pages of ‘legalese’—about the investment
options available under their plans and that they would benefit greatly from
having that information in a comparative format,” says U.S. Secretary of Labor
Elaine L. Chao.
The
centerpiece of the proposed regulation is a requirement to provide
investment-related information in a comparative chart or similar format. As part
of the proposal, the DOL has developed a model chart for complying with this
requirement, while giving plan fiduciaries the flexibility to design their own
charts or comparative formats.
When
finalized, the proposed regulation would be effective for plan years beginning
on or after January 1, 2009.
Exactly
one week after proposing the fee disclosure regulation, the DOL announced it had
inked a memorandum of understanding (MOU) with the Securities and Exchange
Commission (SEC). The MOU formalizes and strengthens the sharing of information
relating to retirement and investments and provides investors, benefit plan
participants, and plan administrators with better access to more understandable
information that they can use to make informed investment decisions. The over
arching purpose of the MOU is protecting retirement assets held in employee
benefit plans.
The
MOU establishes a process for the department’s Employee Benefits Security
Administration and SEC staffs to share information and meet regularly to discuss
matters of mutual interest. These include examination findings and trends,
enforcement cases and regulatory requirements that impact the missions of both
agencies. The department has oversight over 401(k) and other retirement plans as
well as plan participants, while the SEC oversees, among other areas,
brokerages, investment advisers and mutual funds. Under the MOU, the DOL and SEC
will cross-train staff.
So
what does this mean for 401(k) purveyors—that is, fund and
insurance companies?
First,
fund companies will no longer be able to disguise investment fees as
administrative expenses and call those products no-load or low-load, because
those fees and expenses will be clearly differentiated on paper.
And
insurance companies that wrap the 401(k) plans they sell in an annuity—and
there are many—will see that design exposed. A group annuity wrapper turns a
401(k) plan into an insurance product that’s exempt from the Securities Act of
1933, which provides certain tax preferences to the plan sponsor (employer) and
excludes it from the accounting and disclosure provisions that apply to
regulated securities. An advantage to the provider in this arrangement is that
the fees are not subject to the SEC rules that apply to other 401(k) products.
Typically invisible to the employee, this arrangement can place an additional
drag on investment returns in the form of annuity fees. Full disclosure of those
fees could affect the product’s competitiveness, because a non-insurance
provider can offer the same battery of investment options, minus the group
annuity. This may not worry the plan sponsor, but may convince retiring
employees to roll over their 401(k) assets into a less expensive qualified
plan—in short, take assets away from
insurance companies.
The
fee disclosure issue will not be going away. An AARP survey last year found that
83 percent of people don’t know how much they pay for their DC plan, but
nearly the same percentage called fees an important consideration. They’d be
right. According to the DOL, if a plan participant has US$ 25,000 in a 401(k)
today and over the next 35 years averages a seven percent return and pays 0.5
percent in fees and expenses, he will have US$ 277,000 at retirement. But add
another one percent in fees and he’ll have just US$ 163,000 at retirement.
That’s a 28 percent reduction.
Plain English
One
product that continues to get lots of attention is annuities. Sales of annuities
have come under increased scrutiny in the past few years, particularly those of
indexed annuities, for which the SEC has cited a growth in complaints of abusive
sales practices. Such complaints include claims that complex annuity features
haven’t been adequately disclosed and of outsize commissions funded by high
surrender charges imposed over long periods, which can make the annuities
particularly unsuitable for seniors.
These
issues must be resolved and the American Council of Life Insurers (ACLI) is
working with regulators, insurers, and other industry trade associations to do
just that.
They
are banding together to present prospective buyers of annuities with
streamlined, plain-English descriptions of the basic features and costs of
annuities. Those shopping for an annuity also may be able to go online and
compare the costs and features of one annuity to those of another.
The
project is popularly known as a ‘uniform document offering for annuities’
and is currently in the pilot program phase. A simplified 2 ½ page document,
which was developed by the American Council of Life Insurers (ACLI), the
National Association for Variable Annuities (NAVA) and has the full support of
the National Association of Financial Advisors (NAIFA) and the National
Association of Independent Life Brokerage Agencies (NAILBA), is being tested as
we speak in
Iowa
and
West Virginia
.
To
start, the parties created disclosure templates. Those for fixed and index
annuities build upon the requirements set forth in the disclosure model of the
National Association of Insurance Commissioners (NAIC). The disclosure template
for variable annuity products follows disclosure requirements under federal
securities laws.
These
templates were used to produce sample documents based on actual annuity
products. The samples were then tested in a series of focus groups and
one-on-one interviews with retirees, baby boomers, and producers. Feedback from
all three groups was overwhelmingly positive. After each set of groups and
interviews, recommendations were incorporated into the samples and they were
retested.
ACLI
also commissioned a consumer protection and behavior expert to review and
provide feedback on the documents and to develop guidelines to assist companies
in writing consumer-friendly disclosures.
As
directed by its Board of Directors, the ACLI has been meeting with federal and
state regulators over the past several months to have the templates become part
of the regulatory regime. The templates have been well received by regulators.
Indexed
annuities face an additional challenge in the form of SEC Rule 151A. Proposed by
the SEC in June, the rule reclassifies these products as securities, a proposal
that has far-reaching implications for the industry and
for consumers.
For
many individuals, an annuity is an important component of ensuring a livable
income in retirement. Indexed annuities have offered investors a middle ground
option between low-return fixed annuities and market-volatile variable
annuities. However, the ambiguity in the way the products are regulated has led
to lawsuits over unfair sales practices. If the SEC’s proposal to reclassify
indexed annuities as securities products is enacted, these vehicles will be
subject to regulatory requirements similar to those for variable annuities and
other
securities investments.
At
present, indexed annuities, like fixed annuities, are considered insurance
products and are exempt from federal oversight—that is, regulation by the SEC
under the Securities Act of 1933; instead, they fall under the purview of state
regulation. Currently, variable annuities are classified as
securities products.
First
introduced in 1995, indexed annuities have grown from US$ 14 billion in sales in
2003 to US$ 25 billion in sales in 2007, with more than US$ 123 billion invested
in the products today, according to
the SEC.
New Plans
Financial
services providers are facing these and other challenges head on. For starters,
they are adding exciting new investment options for DC plans—that is, 401(k)
and 403(b) programs.
One
DC innovation is the addition of target-date mutual funds as an investment
choice.
According
to Pension & Investments
analyst Jenna Gottlieb, their popularity will enable investment-only
providers and insurers to recapture market share. “When 401(k) plans first
were introduced in the early 1980s,” she writes, “business flowed to
unbundled service providers such as banks and insurance companies. Less than a
decade later, mutual fund companies bundling record keeping and investment
management became the dominant players. Now, the landscape is beginning to
change. As more defined contribution plan executives demand customized investments and annuity products,
unbundled service providers are increasing their book of business. As a result,
industry observers see a slow shift away from the mutual
fund behemoths.”
According
to Financial Research Corporation (FRC), target-date assets have risen from US$
8.2 billion at the end of 2000 to almost US$ 183 billion at year-end 2007. And
it projects target-date assets will reach US$ 567.5 billion by 2011.
McKinsey
believes those facing the stiffest challenges to growth are companies that offer
only record keeping. Investment-only managers with excellent track records
should do well, especially those that add target-date funds to their offerings.
Insurers and mutual fund companies also are poised to benefit from this trend.
Virtually
all of the leading 401(k) plan providers now offer target-date funds as an
investment option.
One
of the newest retirement savings twists to hit the market is the Roth 401(k) and
its non-profit counterpart the Roth 403(b).
Created
by a provision of the Economic Growth and Tax Relief Reconciliation Act of 2001
(EGTRRA), Roth 401(k)s and 403(b)s became available on January 1, 2006. The Roth
retirement plan provision was set to sunset—that is, end—December 31, 2010,
along with the rest of EGTRRA. But the passage of the Pension Protection Act of
2006 extended the program and Roth 401(k)s and 403(b)s are here to stay.
Technically
speaking, these plans are designated Roth accounts within 401(k) or 403(b)
plans. Practically speaking, they allow an employee to choose a type of tax
treatment for a portion or all of their 401(k)/403(b) contributions.
In
traditional 401(k)/403(b) plans, which Congress introduced in 1978, employees
make pre-tax contributions. Earnings grow tax-free, but withdrawals are taxed.
The
Roth 401(k)/403(b) option lets employees make post-tax contributions and
tax-free withdrawals. Contribution limits are high and there are no income
limits.
When
an employer adds a Roth option to its 401(k)/403(b) plan, the employee may
contribute to the Roth account, the traditional 401(k) account, or a mix of the
two.
Insurance
companies are on the leading edge of the Roth trend. In 2006, for example,
American United Life, Hartford Financial Services, ING (
Americas
), John Hancock, MassMutual, Nationwide Financial Services, Principal Financial
and Transamerica Financial all launched Roth products, many with exceptional
educational materials and online Roth calculators for both plan sponsors and
employees. At first, they didn’t have many takers.
Analysts
aren’t sure why employers have been slow to add Roth accounts to their defined
contribution plans. They may be worried about additional administrative costs or
they may not want to educate employees about yet another company benefit. It
looks like that’s beginning to change.
While
overall Roth 401(k) numbers aren’t available, data from individual vendors
shows that employers have begun to embrace the Roth 401(k), according to InvestmentNews
analyst Lisa Shidler. Among the examples she gives:
*
Hartford
Financial Services.
Thirty-one percent of The Hartford’s plan sponsors now offer their employees
the Roth 401(k) option, up from just seven percent in March 2007.
*
Vanguard.
Twenty-eight percent of Vanguard’s plan sponsors now offer their employees the
Roth 401(k) option, up from 19 percent in May 2007.*
Merrill Lynch. Twelve percent of Merrill Lynch’s defined
contribution clients now offer their employees the Roth 401(k) option.
*
T.
Rowe Price. Nearly 13 percent of T. Rowe Price’s plan sponsors now
offer the Roth 401(k) option, a 50 percent increase since June 2007.
*
Charles
Schwab. Forty-two percent of Charles Schwab’s plan sponsors now
offer their employees the Roth 401(k) option, up from 37 percent at the end of
2006. It projects that half of its plan sponsors will sign on by year end.
*
Fidelity
Investments. At the end of 2006, some 500 Fidelity plans offered the
Roth 401(k), there were 20,000+ participants, and total participant assets had
reached US$ 50 million.
Another
signal Roth 401(k) accounts are gaining traction comes from Hewitt
Hot Topics in Retirement 2007, for which Hewitt Associates surveyed
employers about various trends. Twelve percent of those surveyed already offer
Roth 401(k) accounts and an additional 32 percent are likely or very likely to
do so.
Another
DC plan innovation is enabling plan participants to buy regular chunks of
annuity benefits, which enables plan participants to build their own personal
pensions.
Only
a handful of insurers offer the program, which is financed while an individual
is still working and saving for retirement. In addition to investing in a 401(k)
or 403(b), the employee can divert a portion of his take-home pay to buy a
guaranteed monthly income after he retires. Each contribution buys a fixed
amount of future income.
Merrill
Lynch was the front runner, launching the Personal Pension Builder, an annuity
for DC plans, in partnership with MetLife, in 2004.
Genworth
Financial was next, launching a product called ClearCourse in 2005, followed by
The Hartford, which unveiled The Hartford Lifetime Income annuity in early 2006.
In
December 2006, Prudential Financial introduced Prudential Income Flex.
Who’ll
be next? Insiders say Lincoln Financial Group and ING are thinking about placing
annuities inside their DC plans as well.
Although
only a handful of plan sponsors have purchased these products, analysts are
convinced that plan participants want an annuity purchase option in their DC
plans and that enthusiasm for the option will only continue to grow.
Brand New
Yet
another DC plan innovation is the ability to invest in exchange-traded funds (ETFs).
Having
gained widespread acceptance among investment advisors and investors in the
U.S.
, ETF providers are now turning their sights to the retirement plan market. And
the defined contribution business could represent the final frontier for ETFs,
which have gone from relative obscurity some 10 years ago to a US$ 700 billion
industry.
“Only
a small fraction of that money is currently held in
U.S.
401(k) plans,” writes Financial
Times analyst Mariana Lemann,
“but providers have high hopes.”
One
of the most compelling arguments for adding the products to a DC platform, she
says, is their low cost structure and fee transparency. That is relevant in
light of the increased media focus from the U.S. Congress on fee disclosure of
investment vehicles in DC plans.
Nevertheless,
significant infrastructure and technological hurdles remain in the way of making
ETFs fully viable in DC plans. For one, most DC platforms simply can not handle
a product that trades throughout the day. Why? Because they were not built to
support seamless record keeping of traded securities—they were built to
support mutual funds, which are not traded securities, as well as commingled
trust and other pooled vehicles for investment. The issue is trying to retrofit
existing DC platforms.
One
company that has ventured into this new territory is WisdomTree, a New
York-based provider of ETFs. WisdomTree has developed its own 401(k) platform,
which supports its own ETFs as well as those offered by Vanguard and iShares.
The platform also offers an open menu of mutual funds and can be used by plan
sponsors, advisors, brokers and third party administrators. WisdomTree is
waiting for the first plan sponsor to sign on.
Another
new investment choice in DC plans are the collective investment funds, which are
also known as
collective trusts.
Just
like mutual funds, collective funds pool investors’ assets and invest in
stocks, bonds and other securities. The chief difference? Collective funds are
typically available only in retirement plans. Because they aren’t sold
directly to the general public, they generally aren’t regulated by the SEC.
“As
a result,” writes Wall
Street Journal analyst Eleanor Laise, “collective funds tend to be
substantially cheaper than mutual funds. That’s driving 401(k) plans to
embrace these products, which are offered by big fund providers like Fidelity,
Vanguard and Schwab as well as by banks and trust companies.”
According
research and consulting firm Greenwich Associates, only 58 percent of large DC
plans used retail mutual funds in 2007. By contrast, 39 percent of such plans
used collective funds last year, up from 33 percent two years earlier. Other
common 401(k) investments include institutional-class mutual funds sold to
retirement plans and other large investors as well as separate accounts, which
are custom-designed for a single retirement plan.
According
to Laise, the pluses of collective funds include bigger nest eggs for DC plan
participants due to low costs. They also are cheaper for DC
plan sponsors.
She
also points to several negatives. Collective funds are not listed in the
newspaper or on financial news Web sites. They often offer far less information
on their performance and holdings than mutual funds. They aren’t required to
send out prospectuses and value their holdings and update performance less
frequently than mutual funds. They can’t be rolled over to an IRA when the
participant leaves the DC plan.
Collective
trusts also are a way to avoid plan fee scrutiny, which is a positive or a
negative, depending on your perspective.
AT&T
has shifted its DC plan participants into two core investments: a company stock
fund and collective funds with names like AT&T Total Return Bond Fund and
AT&T U.S. Stock Fund. DuPont, Chrysler, and Intel also are embracing
collective trusts as a DC plan option.
Good Advice
Insurers
are not only developing innovative products, but also giving their advisors a
leg up in the retirement income game.
John
Hancock Variable Annuities, for instance, has just unveiled a major program to
help advisors develop guaranteed retirement income plans for their clients.
Launched
in July, the Advisor of Choice™ program provides education, customizable
tools, and sales support that will help advisors conduct comprehensive
retirement income reviews with their clients and provide additional services.
“Research
has shown that a large percentage of investors aged 55 to 65 are looking for an
advisor who can help them develop a comprehensive retirement income plan,”
says Marc Costantini, president. “In fact, a majority of these investors would
be willing to consolidate all of their assets with one trusted advisor who
demonstrates the capability to best position their assets to help produce
retirement income.”
A
central focus of Advisor of Choice™ is the Income Readiness Review. This
customizable program gives an advisor all of the materials necessary to conduct
a review with clients, including a client income review matrix, appointment
invitations, confirmation letters, worksheets, review summary, referral
follow-up
and more.
“We
are very pleased to offer a full practice management program that is entirely
customizable, in contrast to the generic tools that are widely available,”
says Louise Santosuosso, vice president of marketing.
Advisor
of Choice™ includes a special section on the John Hancock Annuities Web site
and a CD-ROM containing extensive materials for the Income Readiness Review
program. In addition,
Wood
Logan
Academy
will offer advisors a new one-hour, proprietary continuing education course
dubbed Become the Advisor of Choice: Understanding the Power of the Retirement
Income Plan.
“We
believe that advisors have an unprecedented opportunity to become their
clients’ advisor of choice by choosing John Hancock Annuities as their partner
of choice,” says Costantini. “We offer advisors products that include our
popular JHT Lifestyle Portfolios, investments from leading money managers,
quality customer service and sales support, and award-winning marketing.”
Almost
simultaneously, the
U.S.
division of Sun Life Financial introduced Retirement BlueprintSM, a
value added program designed to help advisors build their business by enhancing
their incoming planning skills.
“Financial
advisors have helped clients accumulate significant assets,” says Mike Shunney,
president of Sun Life Financial Distributors, the company’s annuity
distribution organization. “But with a shift to spending underway, the rewards
can be immense for advisors who are prepared to become the ‘one advisor’
clients turn to for their retirement income strategy.” In fact, 96 percent of
clients plan to consolidate all assets with one advisor, according to AllianceBernstein
Business Overview 2007.
The
Retirement BlueprintSM program provides a step-by-step process and
the tools needed to engage clients in a discussion about lifetime income as well
as their needs, wants and dreams as they prepare for retirement. Core to the
program is an advisor kit containing materials to survey the opportunity, custom
design income plans, and cultivate their client relationships. In addition, the
program offers a series of one-hour plug-and-play wholesaler-led training
presentations on topics relevant to retirement income planning—among them,
maximizing Social Security benefits, the IRA rollover opportunity, planning for
healthcare expenses, and demystifying variable annuity living benefits.
“Today’s
clients will face a much different retirement than previous generations,” says
Shunney, “which makes it vital for advisors to understand how risk factors
such as longevity and lifestyle will impact retirement income plans. Instead of
focusing on specific products, the Retirement Blueprint program enables advisors
to see the big picture and the many elements that could affect a person’s
retirement plans and financial decisions. Mastering this paradigm shift will
also prepare advisors for clients who want to begin consolidating their assets
as they shift toward retirement.”
Allstate
is helping its advisors by helping their customers to define their retirement
dreams. The insurance powerhouse has just acquired Retirement Bridge™, an
innovative Web-based customer engagement and reporting tool that goes beyond the
numbers that often are the focus of retirement planning.
While
most retirement planning tools seek only data—how many years until the
customer plans to retire, how much they’ve saved so far, and what products
they’re using to save for retirement—Retirement Bridge™ helps them better
envision their individual retirement goals, including where they want to live,
what they want to do in retirement, their biggest worries, and their retirement
preparation. Through this secure, online survey, customers are able to address
what is truly important in their lives through a wide range of topics, from care
giving to how they would like to work with a financial representative.
Easy-to-read
reports help customers see the challenges and opportunities ahead of them,
including worksheets containing tips and resources based on the customer’s
interests during retirement. The survey tool allows Allstate financial
representatives greater insight into the customer, enabling stronger and more
trusting long-term relationships.
“Planning
for retirement can be frustrating and intimidating for anyone,” says J. Eric
Smith, president, Allstate Financial Services. “Allstate’s vision is to
reinvent retirement for middle market consumers and Retirement Bridge™ allows
us to help customers envision and plan for their retirement in new and more
meaningful ways.”
Power Play
Finally,
forward-thinking insurers are looking for ways to mine the power of the
Internet.
A
great example is Axa Equitable, which just unveiled MyRetirementShop.com, an
exciting new retiree Web portal that demonstrates the power of thinking outside
the box to cement your brand with the Boomers.
“One
of AXA Equitable’s core values is to go above and beyond for our clients,
those who have trusted us to help them build a nest egg for their definition of
a rewarding retirement,” says Christopher “Kip” Condron, chairman and CEO.
“My Retirement Shop is our latest innovation toward meeting the needs of
customers, and reinforcing our commitment to bringing individuals near or at
retirement the information and resources they want and need to live the
retirement they desire.”
“People
nearing or at retirement are internet savvy, information hungry and active,”
says Barbara Goodstein, executive vice president, chief marketing officer and
chief innovation officer. “According to a 2008 Forrester research study, this
group is spending an average of nearly 10 hours per week surfing the Web.”
Individuals
who log on to MyRetirementShop.com will no longer have to shop the Web site by
site, topic by topic, looking for information and services—AXA Equitable has
done the shopping for them. Some of MyRetirementShop.com’s offerings include:
Kiplinger for financial news and articles; Fodor’s for travel information and
a 20 percent discount on the purchase of Fodor’s publications;
Opentable to research, locate and book reservations at restaurants
throughout the U.S.;
Ticket Network Direct to purchase tickets to concerts, theatrical and
sporting events; TravelNow to research and book flights, hotels, cruises,
vacation rental homes, and cars online; CookingLight magazine for recipes and
other culinary insights;
Spafinder to find a spa, book an appointment online, and get a 10%
discount on gift certificates; Cypress
Golf Solutions to book a tee time at a 10 percent discount at golf courses
throughout the U.S.; Castle Connolly
to find America’s top doctors and research their background;
Wheretoliveafter50.com to find information on the best places to
retire; Uclick to find brain
teasers and other online games; ServiceMagic
to find information on licensed, pre-screened and customer-rated home
improvement contractors throughout the U.S.;
Healthology to view health and fitness news and tips on maintaining a
healthy lifestyle; Healthclubs.com to view a directory of International Health,
Racquet and Sportsclub Association (IHRSA) health clubs, fitness centers, and
gyms in the U.S. and internationally; RetirementJobs.com
to view information on available jobs from companies looking for active,
productive and conscientious mature adults;
AXA Assistance to find emergency travel assistance, emergency travel
insurance, and a second medical opinion.
There
is no cost or obligation to enroll. What’s not to like? Nothing this
55-year-old editor, who enrolled the same day the newswires carried the press
release of the site’s launch, can discern.
As
you can see, the past 18 months have brought exciting new developments in the
retirement markets. Those developments are making it possible for financial
insurance companies to really capitalize on the impending retirement years of 77
million Baby Boomers. They also are bringing new options, cost transparency and
product clarity to the Boomers themselves. Now that’s a win-win proposition.
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