Those approaches are (1) a retirement experience “around” a product and (2) retirement income “within” a product. Firms that offer product around a product “own” client relationships and have existing relationships with participants so there is already contact. A question here, McCarthy said, speaking at the Securities Industry and Financial Markets Association (SIFMA) Savings and Retirement Symposium in Washington, DC last week, is whether simply knowing the client by being a point of contact on the retirement plan is enough. Currently, that connection point seems to be the hurdle, and so being the provider is enough to connect with the participant. The question, McCarthy said, is whether that will continue to be enough.
Products offered “within” are those designed to be offered in or on the platforms of other distributors, McCarthy said. They might be supposed to be used as a component of an overall solution – but, depending on how they are positioned on the platform, they might not be used that way.
There are some unique benefits to working at insurance company when it comes to addressing the retirement income market, James Brockelman, Executive Vice President at John Hancock Retirement Services, said; insurance companies will be in a good position moving forward and they have a capacity to create products for the Baby Boomer generation. Insurance companies can give people downside protection which, although participants will have to pay for that added level of protection, can really help secure retirement. “The whole retirement income initiative is a huge opportunity for providers,” Brockelman said.
In the retirement income marketplace insurers are leading the way currently, but structured product manufacturers are converging McCarthy said; insurers may have a head start of decades, but that might only be worth another 12 months of being ahead of the curve, he predicted.
Steve Ulian, Senior Vice President with Fidelity Institutional Retirement Services Company said he believes that there will be a place for annuities, whether they are fixed, variable, or some other type, in a retirement income plan. He said that putting these type of products within plans is not as simple as most investment options. Fidelity has one plan going live with a generated income product in May, he said and operationally there is a significant amount of work necessary to put these types of products into a defined contribution plan.