What is mailbox money – and why is it crucial to retirement?

Aging baby boomers represent a historic opportunity to boost the sales of income-generating investment products, according to industry leaders who kicked off the Insured Retirement Institute conference in Boston today. Tapping that market requires that investment advisers embrace variable annuities as an important asset in their clients' portfolios. Overcoming traditional adviser resistance to the products is at the top of the agenda of the organization, which represents major insurers, asset managers and broker-dealers and is comprised of about 500 companies and 80,000 financial advisers. “Ensuring that these advisers have the tools, the information, the resources … to help investors create a holistic retirement plan will be a top priority for me, the board, this association,” said Lynne Ford, chief executive of ING Individual Retirement and the new IRI chairwoman. “Financial advisers represent a vital piece of the overall puzzle of how we meet the historic demand for retirement income security.” At the opening of the meeting, IRI leaders released a poll conducted by Cogent Research LLC on behalf of the organization which showed that 60% of financial advisers say that the number of clients who have variable annuities in their portfolios has increased over the last five years. The study also illustrated increasing concern about funding golden years that have become significantly longer as age expectancy climbs; 49% of investors “indicate their top financial goal in retirement is not to run out of money,” according to a Cogent statement. The survey involved 370 financial advisers and 300 investors interviewed in August and September. “The market is ripe for our products,” Cathy Weatherford, IRI president and chief executive, in a speech. “I call it mailbox money.” Ms. Weatherford said that one of the most promising avenues to boost usage of variable annuities is to make them part of rollovers for qualified-employer-sponsored retirement plans. Industry leaders, however, acknowledged that there is still much work to be done to increase acceptance of annuities, which are criticized for their cost and complexity. Investors often fear losing access to the money they sink into such products. Bruce Ferris, executive vice president of sales and distribution at Prudential Financial, pointed out that since 2002, the rise and fall of annuity sales has closely tracked the S&P 500. In the second quarter of this year, about $30 billion of annuities were purchased. “This is an unacceptable outcome for future growth,” Mr. Ferris said. “We need to do a better job in educating the uninformed and the nonbelievers.”