Lincoln Financial Provides Predictions on Retirement Industry


Fee disclosure regulations, in-plan guarantees, target-date strategies and retirement planning optimism will significantly impact the retirement plans industry in 2012, predicts Chuck Cornelio, president of Lincoln’s Retirement Plan Services.


“As we enter 2012, we see greater interest in employer-sponsored retirement plan savings and investment options that offset volatility, include guarantees and offer flexibility,” said Cornelio. “In this new era of fee disclosure, plan providers are increasing their emphasis on demonstrating the value of their services. We are also finding that our optimistic approach to motivating savers to take actions that lead to better outcomes is appealing to plan sponsors and participants alike. People are tired of being scared or berated into saving and many are simply overwhelmed by the thought of even getting started.”

Fee Disclosure  

According to Cornelio, fee disclosure regulation continues to be a topic at the forefront for the industry. Retirement plan providers and advisers need to clearly articulate the value they bring to participants and plan sponsors through proof points and quantitative measurements. By increasing transparency, fee disclosure provides another way for providers to help clients meet their fiduciary responsibilities.

“We believe that transparency is a good thing,” said Cornelio. “It’s one of the best ways to demystify the real and perceived costs associated with your plan. Education through disclosure can also help empower participants with additional information to motivate them to make better investment and saving decisions that will enhance retirement readiness.”

In-Plan Guarantees  

In-plan guarantees provide a compelling reason for consumers to consider options available in their employer-sponsored plans that offer financial protection coupled with growth potential. The combination of a prolonged economic crisis, market volatility, low-interest rate environment and increased dependency on defined contribution plans to provide retirement security has fostered an environment where guaranteed income, downside market protection and enhanced retirement readiness tools are increasingly essential offerings for retirement plan providers. 

“Insurance companies are uniquely proficient in managing risk,” said Cornelio, “and are now leveraging their expertise with these types of guarantees and turning them into viable and desirable solutions in the retirement plan landscape.” 

Guaranteed withdrawal benefits, lifetime income options and principal protection strategies will command more attention as sponsors and participants will look to these solutions to meet retirement planning goals.

Target-Date Funds 

Because target-date funds are likely to remain the preferred Qualified Default Investment Alternative (QDIA) for many plan sponsors in 2012, investment managers and plan providers will likely step up their efforts to educate plan sponsors and participants about the funds’ features and benefits. 

“To realize the full value of target-date funds, the industry needs to acknowledge that the ‘set it and forget it’ approach currently associated with target-date funds needs to be supplemented with ongoing efforts to make sure asset allocations adapt to market volatility and provide the right level of diversification,” said Cornelio. “People are also beginning to use target-date funds for more than just getting ‘to’ retirement, but also to help them get ‘through’ retirement. Changing goals often require changing your investment strategy to match.”

Target-date funds will be one of the fastest growing asset classes in the retirement plans space, particularly if the industry champions their evolution.

Optimism in Retirement Planning 

Providers and financial advisers have the opportunity to set themselves apart by being proactive and positive through retirement planning communication and education for their clients. Offering clients support -- either in-person, on the phone or online -- that is designed to meet their needs and provide an optimistic view of the future can foster healthier retirement outcomes.

“Providers who help today’s savers view retirement planning in a more positive light are more likely to empower participants to reach their goals,” said Cornelio.