The financial services industry has been working for years to get annuities into retirement plans – and the good news is that people appear to like that idea.
The bad news is that they like annuities for the sake of other people – they don’t personally want them.
That is according to results of a focus group report today by consumer research firm Hearts & Wallets that included comments from 70 people ages 45 to 74 with at least $500,000 in assets to invest.
“The No. 1 thing people liked about it was this nostalgia for the bygone era of pensions,” said Laura Varas, CEO of Hearts & Wallets. But, “they didn’t see it was something they would use … They said the target was less savvy investors.”
If the companies providing income products are focused on retirement savers with higher-than-average assets, those efforts are misplaced, Varas said.
“The target for this product is squarely mass affluent. ‘It’s a good social net for younger consumers,’ is what the focus group participants said,” she said.
However, people were receptive to the idea of retirement income being a separate “asset class” to further diversify retirement portfolios, she said. That was positioned in the focus group as having 30 percent of employer-sponsored retirement plan assets in a product that gives the option – but not the requirement – of lifetime income.
About a dozen companies have been trying to get into the target-date-and-annuity market. The products offer a range of choices, and some big 401(k) sponsors are opting for them. But retirement plan participants in many cases haven’t been using them as intended, with one company finding that they allocated too little to target dates to fund substantial retirement income, a report earlier this year from Morningstar found.
Further, “bad experiences” with target-date funds could be keeping people from using them, including series that are being paired with annuities, Hearts & Wallets stated.
“A lot of older people are very concerned about being too conservative” with their asset allocations, Varas said. Some focus group participants said they “had to lie” about their age to get into a target-date fund with a longer timeframe, or one that would have higher equities exposure around they time they turn 65, the company found.
And it could be a limiting factor that annuities are being paired with target-date funds rather than other asset-allocation products, Varas said.
“It would make a lot of sense to allow lifetime income, as an asset class, to be added to target-risk funds as well as target-date funds,” she said.
All eyes have been on Fed Chairman Powell this week but Congressional spending affects inflation as well.
“Insurance is paramount in the broker-dealer industry, but you have to have insurance that pays,” a plaintiff's attorney said.
The group of professionals, including a father-son duo, come together in Traverse City after managing more than $500M at their former firm.
The 44-year veteran joining the firm's employee advisor channel joins after managing $112M at the wirehouse.
Reactions to recent world-shaping events shows financial markets' focus might be misdirected, suggests Saturna Capital's senior investment analyst and portfolio manager.
Uncover the key initiatives behind Destiny Wealth Partners’ success and how it became one of the fastest growing fee-only RIAs.
Morningstar’s Joe Agostinelli highlights strategies for advisors to deepen client engagement and drive success