Products October 17, 2011

Hartford Introducing Retirement Income Solution for 401(k)s

The Hartford is rolling out The Hartford Lifetime Income solution that can be delivered through 401(k) plans to provide participants with a guaranteed paycheck for life.
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The company says the product simplifies income planning for plan participants; they can purchase “income shares” that provide $10 of guaranteed monthly income for life. That means 50 income shares would provide $500 a month.  

The cost of each income share varies with the plan participant’s age and current interest rates, and is predicated on retirement at age 65. The amount of income from each unit can increase if the participant retires later or can decrease if the participant retires earlier. Retirement plan participants can invest in Hartford Lifetime Income through regular payroll deductions or lump-sum payments.  

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In addition, The Hartford created the income shares to be portable, which means that a plan participant can retain the shares and the guaranteed income they provide if he or she changes employers, or the plan sponsor changes providers or recordkeepers.  

Hartford Lifetime Income is a fixed deferred annuity imbedded as an investment option within 401(k) plans, which means it is not affected by volatility in the equity markets. The investment option is also included in the Fiduciary Assure program, an optional, third-party co-fiduciary service provided by Mesirow Financial at no additional cost. Guarantees are based on the claims-paying ability of Hartford Life Insurance Company.  

Hartford Lifetime Income is initially available to retirement plan sponsors newly contracted with The Hartford and their plan participants.  

Data & Research October 17, 2011

Questioning the Value of Professional Advice

The latest report from Hearts & Wallets contends that more wealthy investors are questioning the value of professional financial advice as a result of their shrinking assets.  
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The shifting fortunes of American investors are detailed in a recent Hearts & Wallets report, “Portrait of U.S. Household Wealth: Market Sizing, Segmentation and Product Ownership by Age, Assets, Lifestage and Behavioral Segment.” The analysis taps into multiple government data sources, proprietary quantitative data from 4,500 U.S. households, and ongoing qualitative research.

The analysis shows total U.S. household investable assets at $30.2 trillion at year-end 2010 with retirement assets at $10.7 trillion and taxable assets at $19.5 trillion. Taxable assets climbed steadily since 2004, from $12.9 to $19.5 trillion. Retirement assets recovered from a stumble down to $8.1 trillion in the crash of 2008, rising to slightly surpass their 2007 peak of $10.5 trillion.

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Of the approximately 120 million households analyzed in the report, about 30 million have at least $100,000 in investable assets.  This leaves 90 million households that have not reached this mark, an increase from 82 million before the 2008 market turmoil.

“The 2008 downturn hit households very unevenly, and that may prove true again with continued market turbulence,” said Laura Varas, Hearts & Wallets principal. “In intuitive terms, about 1 in 8 of the households now ‘in’ the $100,000 to $250,000 segment moved down from a higher investable asset segment.”

Hearts & Wallets argues that investors with decreasing assets are changing their opinions about the value of professional financial advice as a result.

“For some households, the drop in asset segment was because of personal investment choices, and a segment of those are now seeking the help of a professional financial adviser, a behavioral segment identified by Hearts & Wallets as ‘Upshifters,’” said Varas. “Other households suffered the decline while having professional financial advice, and some, ‘Downshifters,’ now question the value of that advice and whether they might make better choices themselves.”

Affluent asset segments have become smaller; the $2 to $5 million and the $250,000 to $500,000 segments were particularly hard hit. The $250,000 to $500,000 asset segment now totals 6.4 million households, down about 25% from 8 million in 2009. This segment is concentrated in the 45 to 54 and 55 to 64 age groups as in 2009. This group controls $2.5 trillion in assets, down from $2.9 trillion with the decline occurring in retirement accounts and managed investments.

The $1 to $2 million and $100,000 to $250,000 segments grew, as they received households that shifted down into these asset segments.

“The shifting of assets has been dramatic, illustrating the challenge in offering asset-based pricing services to investors,” said Chris Brown, a Hearts & Wallets principal. “How much money someone has at a point in time is not a particularly insightful descriptor of their interests or concerns. The financial services industry needs to understand this when developing investor servicing models.”

The report also provides retirement income market size data, which retirement assets are the biggest and fastest growing, and the drawdown rates for households 65 and older by asset segment.

 

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