AARP Financial to expand retirement solution offerings

Under new leadership, AARP Financial Inc., the financial services subsidiary of AARP, plans to expand its offerings of retirement solutions by the end of the year.
“A real key to success over the long term is providing integrated solutions,” said Richard “Mac” Hisey, AARP Financial’s new president.
“The biggest new initiative is integrating the funds with other products to get a better solution for people,” he said. “We have been working on this over the past year and will begin rolling it out in 2008.”
Part of that initiative will call for a focus on retirement income, rather than accumulation, Mr. Hisey said. Investors will be able to contact financial advisers at AARP Financial and talk about strategies to maintain a predictable income stream during retirement.
“We are anticipating offering additional products to help people generate income in retirement,” Mr. Hisey said. “We already offer, in partnerships with other industry leaders, some of these products, such as annuities … [Over] the long term, we want to be able to provide that all together in a more integrated offering.”
The firm already this year has enhanced the retirement planning resources on its website, including adding a retirement income calculator and online content about retirement income.
“Later in the year, we will be adding more comprehensive tools about planning for retirement income, investment strategy solutions and retirement planning,” Mr. Hisey said.
“For the retirement planning initiative, we are pulling together people from each team, marketing, product development, investment strategy and technology,” he said. “That’s where we will be growing in the future.”
AARP Financial, which was founded in 2005, began offering mutual funds two years ago. Its offerings include four index stock funds and one fixed-income fund, which are subadvised by State Street Global Advisors of Boston.
Today, the Tewksbury, Mass.-based fund group has $173 million in assets, according to Financial Research Corp. of Boston.
Guiding it now is a 23-year veteran of the mutual fund industry. Mr. Hisey took over the helm of AARP Financial in May from Larry Renfro, a former Fidelity Investments executive who ran the funds for three years and returned to Fidelity of Boston last month to work in a new division called Fidelity Developing Business.
The AARP Financial advisers who sell the funds have an average of eight to 10 years of industry experience, Mr. Hisey said.
“They have all received [certified financial planner] training,” he said.
The benefit to using AARP Financial’s own advisers is that the lack of an intermediary means the funds are inexpensive, Mr. Hisey said. The expense ratios are capped at 0.50%, he said.
AARP Financial employs about 60 people.
Even though the funds are well-priced, it is harder for a small firm to get noticed, Mr. Hisey said.
AARP Financial’s funds are marketed directly to its Washington-based parent’s membership via direct mail, telephone and the Internet. AARP, the nation’s largest advocacy group for older Americans, has more than 40 million members, Mr. Hisey noted.
Some observers say that AARP Financial could be a formidable competitor.
It is viewed as a respected organization, said David Greene, vice president of CJM Wealth Advisers Ltd. of Fairfax, Va., which has $400 million in assets under management.
“We refer clients to them as a resource, but we’ve never had anyone ask about the funds,” he said.
“They have a captive marketplace; it could work. We think as a resource, across the board, AARP is a great resource,” Mr. Greene said.
“There are long-term-care plans and annuities sponsored through AARP. Now they are leveraging that captive audience to provide products,” Mr. Greene said.
Some advisers urge caution, however, with regard to AARP offering advice.
AARP is about advocacy, said Ivory Johnson, director of financial planning at Scarborough Capital Management Inc. of Annapolis, Md., which has $1 billion in assets under management.
“I would ask them, ‘Are you an advocate for the baby boomers or are you a profit center?’ You are giving people investment options, but maybe you are not going to give them the best advice,” Mr. Johnson said.
The mutual fund operation is separate from the advocacy group, Mr. Hisey said.

E-mail Sue Asci at [email protected].