Products March 28, 2007

John Hancock Launches New Plan and Adviser Pricing Structure

The firm has introduced a new retirement plan vehicle that gives advisers pricing flexibility.
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“We have taken something that was effective and made it better,’ Jim Brockelman, Executive Vice President of National Sales at John Hancock Retirement Services, told PLANADVISER.com. The new JH Signature product has taken Hancock’s existing “chassis’ and upgraded it, making it more user friendly, he said.

In the past, the pricing was flexible, Brockelman said, but not as clear as the firm wanted. Therefore, he says, the product brings more transparency and “an apples to apples comparison with mutual funds.’

The new JH Signature product introduced a standardized commission grid, which includes five different pricing and standardized commission options, with or without a wrap fee. Classes one through four have standard commission options, built in sales and service fees, including combinations of deposit-based and asset-based compensation, of 50 bps, 37 bps, 25 bps, and 15 bps, respectively, while class five uses a wrap fee and allows for fully customizable commissions.

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The plan offers access to over 165 funds, across all asset classes and investment styles, and more than 45 brand name and institutional managers, Hancock says, all of which pass review by the firm’s Investment Management Services (IMS) team of 14 analysts. Both lifecycle and lifestyle portfolios are available, Brockelman commented, as are alternatives including global bonds, REITs, and TIPS. There is no limit to the number of funds and there are no proprietary fund requirements in the JH Signature product.

There are also new tools and fund shortlists to make it easier to qualify for Hancock’s Fiduciary Standards Warranty qualification, the firm said. The Fiduciary Standards Warranty qualification protects plan sponsors and advisers who serve as plan fiduciaries. Plans that offer at least one investment option from twelve designated asset classes plus all nine different lifecycle portfolios or lifestyle funds in all five risk categories qualify for the Warranty.

Where this requirement is met, the Warranty applies to all funds in the John Hancock lineup, not just those managed by John Hancock. Under the warranty, John Hancock promises to restore plan losses and pay litigation costs related to the suitability of this process or its investment lineup.

Advisers can find more information about the product at www.jhsignature.com.

Data & Research March 28, 2007

Americans Working With Advisers Better Prepared for Retirement

Households that work with financial advisers are saving more and are on track to replace more income in retirement than those that do not.
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The Fidelity Research Institute’s 2007 Retirement Index found that the typical working American household will be able to replace 58% of its pre-retirement income when members stop working – a slight increase over the 2006 study result of 57% (see Replacement Rate Assumptions Could be Wishful Thinking).

However, when the Index numbers were broken down further, Fidelity found that households working with a financial adviser are on track to replace 67% of their income in retirement, on average, an increase of five points over last year’s income replacement level of 62% for the same group. Although people working with an adviser saw a more substantial increase in preparedness, those not working with an adviser only increased their income replacement by one percent, 57% this year over 56% last year.

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Not surprisingly, since their income replacement rate is higher, Fidelity’s Index found that working American households using the services of an advisor are saving 5.9%, nearly twice the 3% savings rate of those not working with an adviser. When examining the dollar amount of monthly saving of those with or without an adviser, the former are saving more than double that of the latter ($417 and $167, respectively).

Nearly all (98%) of those working with advisers have begun saving for retirement, compared to 79% of those without such guidance. Also, advised workers were more likely than the overall group surveyed (60% and 42%, respectively) to take action in the last six months to improve their retirement readiness by taking steps such as receiving guidance from a financial professional, reallocating their retirement portfolio or increasing their contribution to an existing IRA.

Although the replacement rate of those working with advisers is better, there is still going to be a significant decrease in one’s standard of living, unless changes are made Fidelity said, something advisers will need to consider in ongoing planning, especially in light of the firm’s research estimating that a 65-year old couple retiring today can expect to pay $215,000 to cover medical costs in retirement (see Estimated $215,000 Needed for Retiree Health Care Costs).

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