Products February 4, 2014

Fidelity Releases Fixed-Income Portfolio Tool

Fidelity Financial Advisor Solutions, a unit of Fidelity Investments that provides mutual funds and other investment services, released an interactive calculator that helps financial professionals build fixed-income portfolios.
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Created by the firm’s new portfolio construction guidance team, the Fidelity Yield Investigator is designed to help advisers understand the impact of rising and falling interest rates on fixed-income portfolios, among other uses. To use the tool, advisers input hypothetical data—such as bond yields, spreads, time horizons and targeted risk and return levels—to test how a sector or hypothetical bond portfolio may perform in different market conditions.

The Fidelity Yield Investigator, the firm says, makes rigorous portfolio construction analytics available at no cost in a simple format.

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“Many financial advisers are asking, ‘What do I do with my fixed-income portfolio if interest rates rise?,’” says Robert Litle, a senior vice president at Fidelity Financial Advisor Solutions. “This potential rising interest rate environment represents a new reality for many advisers, who have seen rates trending downward for years.”

Litle says that advisers will have to think differently about a diversified portfolios in such an environment. He says the Fidelity Yield Investigator will help to simplify many of the complex calculations inherent in those portfolio construction decisions.

The Fidelity Yield Investigator allows financial advisers to adjust for a range of scenarios using easy-to-populate screens and sliding scales indicating potential yield, percent return, duration and volatility. The format should help advisers easily research and analyze hypothetical, fixed-income portfolios consisting of different bond sectors, the firm says.

The tool, which does not recommend specific products, also includes advanced settings that enable users to modify the currency translation effect, as well as potential default and recovery rates. It also allows financial advisers to fine-tune sector allocations by entering specific numbers in the percentage allocation boxes.

The Fidelity Yield Investigator is the first interactive calculator featured in Fidelity Financial Advisor Solutions’ “Take Charge of the New Reality” campaign, which will strive to deliver insights to help advisers and retirement plan sponsors as the markets continue to evolve.

For more information on the Fidelity Yield Investigator tool or the “Take Charge of the New Reality” campaign, financial advisers can visit Fidelity’s website or call their Fidelity representative.

Data & Research February 4, 2014

Great Recession Batters Gen X

Members of Generation X, those born between the early 1960s and the mid-1980s, have seen their retirement readiness degrade since the start of the Great Recession.
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Members of Generation X across all income levels have seen earnings slip since peak years in the early and mid-2000s, according to new research from the Insured Retirement Institute (IRI). Income loss is most pronounced at the lowest end of the scale, where incomes have fallen nearly 16% for workers earning wages near the poverty line. For the top 5% of Gen X earners, incomes have declined a little more than 6% from a 2006 peak average of $338,686—falling to $318,052.

Less in earnings means less money for retirement savings, the IRI’s research shows. In the last two years, Gen Xers’ median savings for retirement has dropped 15%, from $70,400 in 2012 to $59,800 today. Currently, of those that have money saved for retirement, 42% of Gen Xers have less than $50,000 saved, up from 30% with less than $50,000 saved two years ago. And overall, slightly less than two-thirds (65%) of Gen Xers now have at least a small amount saved for retirement, down from 72% two years ago.

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Other notable findings in the report show twice as many Gen Xers now lack confidence in their ability to attain a financially secure retirement compared with two years ago. Today more than four out of 10 (42%) Gen Xers say they are not confident that they will have enough money to live comfortably in retirement, up from 20% in 2012.

Gen Xers also continue to have difficulties paying mortgages or rent expenses. Such difficulties are cited by about 36% of Gen Xers, a modest 3% increase from two years ago. But because housing costs generally account for one-quarter to one-third of budgeted expenses among Gen Xers, as reported by the National Association of Home Builders, this difficulty hinders many from saving effectively for retirement.

One upshot for financial advisers and human resources professionals is that those Gen Xers who receive professional advice seem to be doing better. The IRI report shows that Gen Xers with an adviser relationship have about twice the amount of retirement savings ($90,400 on average) than those without an adviser.

The report also shows that significant opportunities exist for advisers and plan sponsors when it comes to winning new Gen X clients and improving retirement outcomes, respectively—as fewer Gen Xers are working with financial planners today than were two years ago. In fact, a whopping 77% of Gen Xers say they are not consulting a financial planner to help them get ready for retirement. That’s up 14% from two years ago, the IRI says.

Just one-third of Gen Xers rate themselves as being highly knowledgeable on financial matters, and only about 11% state that they have high levels of knowledge about investing.

For Gen Xers already working with a financial adviser, the top reason for consulting with a professional is to verify that the right investment and planning decisions are being made, at 40%. For those not working with an adviser, the top reason is because they feel that their savings need to be higher before consulting a planner would be worthwhile (25%). 

Other reasons why Gen Xers are not working with financial planners include that they are too young to use one (10%), that they do not need to use one (10%), and that they do their own financial planning (10%).

More on the report results and methodology is available here.

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