Advisers weigh in on targeted payouts

At InvestmentNews’ Retirement Summit 2008, we asked attendees:
What do you think about the new targeted income payout funds such as those released recently by Fidelity Investments and Charles Schwab, and those from Russell Investment Group and The Vanguard which are awaiting SEC approval?

Jim Boudreaux, senior associate at Baystate Financial Services in Boston
Assets Under Management: $4 billion
The whole industry is moving towards retirement income solutions. The insurance industry is moving towards living benefits with variable annuities. The equity industry is moving towards equity funds that move to bonds. Each of these products are just tools and not complete solutions.

Ian Weinberg, chief executive of Family Wealth and Pension Management LLC in Woodbury, N.Y.
Assets Under Management: $150 million
It is a little early to jump in head first with these retirement income products. At the end of the day somebody somewhere is making a guarantee on something.
With low interest rates, it is very hard to make a guarantee of substance for retirees in their late ‘60s and ‘70s. The leverage of an immediate annuity is still a better way for people to think of reducing retirement income.

What do you think about the new targeted income payout funds such as those released recently by Fidelity Investments and Charles Schwab, and those from Russell Investment Group and The Vanguard which are awaiting SEC approval?

Lewis J. Altfest, president of L.J. Altfest & Co. in New York
Assets under management: $550 million

While targeted payouts cause a greater level of inefficiency, clients like target date funds and want to have some cash come out for retirement. However, many of my clients are not sophisticated enough to distinguish between cash payout and real returns.

Nicholas Nicolette, principal of Sterling Financial Inc. in Sparta, N.J.
Assets under management: $250 million

As a firm, we want to find a place and way to integrate retirement income solutions into out client models. Like any new product, we always want to be on the leading edge and not the bleeding edge.

Which team do you like to win the NCAA men’s basketball tournament?

University of Kansas

Tom Orecchio, principal of Greenbaum and Orecchio Inc. in Old Tappan, N.J.
Assets under management: $450 million

We have tried to discuss retirement income products with our clients and we are meeting all kinds of resistance. Our clients experienced their parents running out of money and they want to leave money to their children.
The best possible solution for most of our clients is longevity insurance, where they should put down a relatively small premium and don’t have to give up capital.

Basketball Pick: University of North Carolina

Michael Terry, certified financial planner at Michael Terry Planning LLC in Maspeth, N.Y.
Assets under management: $30 million

I don’t care much for those new retirement products or the age-based retirement funds. I don’t think that they give you enough flexibility. I am also not a big fan of annuities and that is where you are seeing a lot of new products that are being released.
Instead, I establish an asset allocation strategy for my clients by mixing exchange traded funds and managed funds with a core portfolio of index-based funds.

Basketball Pick: University of North Carolina

Bob Glovsky, president of Mintz Levin Financial Advisors LLC in Boston.
Assets under management: $1.2 billion

The retirement income product offerings are interesting and we are still trying to get our hands around them and are trying to figure out the dynamics and where they will fit in. I don’t think our clients are focused on retirement products at all and we need to bring it to our clients in a responsible way and we are ready to do that.

Basketball Pick: University of Memphis

Tim Harding, director at Asset Marketing Systems LLC in San Diego.

It is a bit of a mistake to expect the securities industry to excel at [creating products to focus on] downside risks management because it is not their forte and therefore I am skeptical.