Products August 7, 2008

Principal Releases Retirement Income White Paper

A new white paper from the Principal Financial Group helps financial professionals guide their clients to a personalized retirement income strategy, the company said.
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The Principal said the white paper will give advisers an easy way to see the trade-offs and advantages of different retirement income methods to determine the best fit for a client. Sustaining Income through Retirement: Four Strategies for Retiring Clients compares and contrasts four key methods of turning retirement savings into an income stream:

  • mutual funds with automated income payments
  • variable annuities with guaranteed minimum withdrawal benefits (GMWB)
  • income annuities
  • combinations of mutual funds and income annuities

“Our analysis makes it clear there is no one-size-fits-all solution for creating and managing an income stream for life,’ said Drew Denning, vice president, Income Solutions at The Principal, in a press release. “Many financial professionals don’t have the time or tools to objectively and simply compare the myriad of income producing options. This white paper helps them determine which options—or combinations of options—best meet the unique needs of each of their clients.’

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The white paper evaluates each strategy against factors that impact income in retirement:

  • access to the account balance
  • potential for growth
  • inflation risk
  • market risk
  • guarantees (or lack thereof)
  • income predictability

The report is available at www.principal.com/research.

In Practice August 7, 2008

Advisers See Tax Management Playing Bigger Role

An SEI poll released yesterday found that many advisers think they could do more for their clients in the realm of tax management.
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According to SEI, nearly 97% of advisers said tax management was a consideration when developing proposals for prospective clients. Yet almost the same number (nearly 95%) of advisers admitted they could be doing more for clients regarding tax management. As the market downturn continues to linger, tax management is emerging as an effective way to recognize losses to offset gains and create more wealth for clients, SEI said, but not all advisers have figured out how to optimize it.

As Baby Boomers retire with large retirement balances, more than a third (34%) of advisers felt clients were “very” tax aware, while more than half (55%) felt their clients were “somewhat” tax aware, according to a release of the survey results.

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An overwhelming majority of advisers are not matching gains and losses for tax purposes on an ongoing basis, the release said. Approximately 50% of advisers match at year’s end, while 15% said they rarely, if ever, do so.

“It’s not what you make, it’s what you keep, and continuous tax management throughout the year is a great way to increase a client’s overall portfolio value—especially in these markets,” said Stephen Onofrio, senior managing director, SEI Advisor Network, in the release. “Advisers are telling us that it is a great differentiator with clients, however, they struggle to find the time, resources and expertise to truly leverage tax management on their own.”

The survey demonstrated a mix of products and strategies as the preferred tax management technique for advisers, finding the number one choice is tax managed mutual funds, garnering 36% of adviser responses. Other responses included: tax efficient separate accounts (24%); tax exempt investments, such as municipal bonds (16%); matching gains and losses throughout the year (10%); and harvesting losses on their own at year’s end (8%). Only 6% of advisers said they only focus on gross returns, according to the release.

The poll of nearly 300 independent advisers was administered by the SEI Advisor Network last month.

 

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