Products June 6, 2013

App Helps LPL Advisers Explain Annuities

LPL Financial adopted an annuity visualizer by Lincoln Financial Group to help its advisers explain the benefits and the different rider options of annuities.  

 
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The Interactive Annuity Visualizer Application, which is being customized for LP advisers as part of LPL’s annuity tools and resources platform, was designed to help clearly and quickly highlight the benefits of annuities as part of a client’s retirement plan. The technology was developed to help simplify the message of retirement and educate advisers and clients about the use of annuities for income. 

Used as a dynamic and interactive tool, Lincoln’s Annuity Visualizer streamlines the process, incorporates hypotheticals, case studies and marketing collateral to help wholesalers and advisers aptly explain the various options available to clients.

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Lincoln Financial has been active in partnering with advisers to design a better way to effectively prepare their clients to have an income stream in retirement. In 2012, the company developed an easy-to-use Web-based application, the Annuity Visualizer, that enables advisers to better inform consumers and help them meet needs for income distribution.

“We’ve heard from our partners about the need for an easier way to deliver guidance on statistical information, hypotheticals and product specifications,” said John Kennedy, head of retirement solutions distribution for Lincoln Financial Distributors. It took advisers multiple steps to get the same information, according to Kennedy. The Visualizer provides this information in significantly less time, he said. 

The firm’s goal is to provide its advisers with tools to enhance their clients’ education, process and experience, said Rob Pettman, senior vice president, investment and planning solutions of LPL Financial. “The Annuity Visualizer tool provides a new medium to have meaningful dialogue around insured retirement income strategies as it offers an interactive and personalized way of bringing these concepts to life,” Pettman said.

The Markets June 6, 2013

PSNC 2013: Target Practices

Target-date funds (TDFs) were introduced into the market almost 19 years ago with a simple intention—to provide a coherent investment strategy for participants from the time they enter into a plan until their retirement date.
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Each portfolio would have a glide path that would switch from a higher allocation of stocks to a lower allocation of stock over time. Currently, there are about $480 billion invested in TDFs and by 2020 it is projected that half of plan assets will go into TDFs.

There has been tremendous focus on TDFs and increased scrutiny and interest as they become a more predominant invest choice.

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Pamela Popp, vice president , financial adviser, CAPTRUST Financial Advisors, recommended to attendees at the PLANSPONSOR National Conference that plan sponsors take a step back, and assess several objectives before considering a particular TDF fund. Plan sponsors need to understand participant behavior.  “What are you trying to achieve with the plan? Is it your only retirement plan? Is this a supplemental plan, allowing participants to be more aggressive? What role do you expect the TDF fund to play within the plan? Is it going to be your QDIA? Are you defaulting participants into the plan or are more of your participants making active decisions?” she queried.

 

To or Through?

Once you’ve assessed these factors you need to look at the demographics of the participants. Are you looking for a “to” or a “through” fund? What is their deferral behavior like? What is their withdrawal rate? “When you’ve looked at these factors, you can begin looking into glide path, asset allocations, the number of asset classes and the managers,” she said.

Tom Skrobe, head of BlackRock Defined Contribution Distribution, said that “since 2008 the marketplace has gotten better describing the objectives around stable consumption, or how you want to maximize replacement incomes. These are really important factors around how you want to achieve the goals of your plan. And there is no right answer to that. It’s up to you and your organization to figure that out. Then you can use the screening process to get the right product.”

Jeremy Stempien, director of Investments at Morningstar Investment Management,  added that although TDFs make decision making easier for participants, they are not simple choices for the plan sponsor. “Going with the more traditional approach of signing on with your recordkeeping funds, you are not properly fulfilling your fiduciary obligation,” he warned. Stempien has seen plan committees giving great thought to individual small-cap or large-cap funds, but when it comes to TDFs, they say OK, we’ll add one, without understanding the inner workings of a TDF. He said, “This decision is much more than a one committee meeting.”

Another thing not to do, according to Brett Howell, SVP of Wealth Management and Premier Retirement Benefits Advisor at The Howell & Sharp Group of Merrill Lynch, is “if you are using the exact same analytics as you do when choosing equity or bond funds, you’re probably doing your employees a disservice. Your large cap growth manager buys stock each day. A TDF manager provides an asset allocation service and a glide path service. You have to look at them differently. Think of them separately, and you’ll be on the right path.”

 

 

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