In Practice February 27, 2015

Say This, Not That

Should advisers be more careful of the phrases they use with plan participants? Most agree that lofty statements, technical terms, and jargon should be avoided.
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Bonds, fixed-income investments, debt issuance… so many terms to mean the same thing. Retirement plan participants may know them as the opposite of equities or securities—something needed to keep their assets properly diversified. About two-thirds of respondents (60%) use the term “bonds”; the rest of the answers are split nearly evenly between “fixed income” (21%) and “debt issued by a government or corporation” (19%).

Annuities get the boot. Jeff Snyder, vice president and senior consultant at Cammack Retirement Group, says the word can evoke negative feelings from participants, who in fact like what annuities can do: guarantee income when they are unable to work during the retirement years. Less than one-third of survey respondents (29%) use the word annuities when they talk about this product; 71% choose a phrase such as “monthly income” or “monthly benefit.”

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The participants themselves are the key to the language advisers and providers should use, Snyder believes. “They are smart people, but they don’t do finance for a living,” he points out. To engage the average American, nix the technical language and avoid making things sound more complex or mysterious than they actually are. Snyder is not a fan of “asset allocation,” used by 48% of respondents. He prefers the phrase “investment mix,” and 52% of survey respondents agree with him.

It seems that words with purely English roots (like mix) get the nod over words with Latin origins (like allocation, or practically anything ending in –tion). Some words seem less overwhelming to the average employee even though “allocation” has been used in English since the mid 17th century. (Its entry into English was about one hundred years earlier, as a legal term from the Medieval Latin, as the common first word used in writs that authorized payment.)

What is a participant? “People think of themselves as employees,” Snyder says, not plan participants. The answers were split almost evenly, though between both words: 40% use the word participant and 44% say employee when talking to retirement plan participants. Investor (11%) and saver (5%) are infrequently used.

Despite the contention of Alexandra Taussig, senior vice president for marketing and business strategy at Fidelity Investments, that women dislike lofty statements, the statement “We’ll help you achieve the retirement you’ve always dreamed about” took in more votes (53%) than the slightly quieter “We’ll help you achieve the retirement you envision” (47%).

Thanks to everyone who responded to the survey!

Data & Research February 27, 2015

Don’t Overlook Wholesaler Support

Advisers who encounter some thorny practice problems can turn to a wholesaler, findings of a LIMRA survey suggest.
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According to the survey, “The Whole Team: The Importance of the Sales Desk in the Distribution Model,” both internal and external wholesalers are able to offer distinct value to advisers on a range of issues. The report offers new insights into advisers’ views of wholesaling strategies across manufacturers and intermediaries.

The key value of the survey, according to Breana Macken, senior analyst of distribution research at LIMRA and the author of the report, is that wholesalers are pollinators spreading the ideas of best practices. “In general, wholesalers are the bees, and the advisers are the flowers,” she tells PLANADVISER. “Wholesalers can help advisers grow their business.”

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The concept does work, Macken contends, and it happens in the following way. A wholesaler who has worked with one adviser then visits another. If the second adviser is struggling with a problem similar to one the first adviser was working on, the wholesaler  can offer suggestions based on this previous experience.

The survey found that advisers believe both internal and external wholesalers can answer their questions and solve their problems, Macken says. But they tend to believe that different types of wholesalers can offer different types of support. According to the survey, advisers believe internal sales teams are better at handling requests about planning tools, illustration support and basic service issues.  External wholesalers, in the opinion of most advisers, excel at point-of-sale assistance with a client and product positioning. Advisers were split fairly evenly in their opinions about other requests, such as identifying sales leads and new hire training.

This is not completely accurate, Macken says. “Who does what best depends on not only the request, but also the adviser’s preference, and the wholesalers themselves,” she points out.

Advisers are generally aware of the value-add services wholesalers  can offer; Macken notes that one of LIMRA’s statistics says 54% of advisers point to wholesalers as a success driver. But advisers may not see the range of their value. “A lot of advisers weren’t aware of every single thing a wholesaler can provide, and obviously, some wholesalers at smaller companies are not able to provide everything,” she says.

Value-Added Services

Wholesalers can help advisers with income and expense planning strategies for retirement, for example, Macken says, and share what other advisers are doing to address a client issue such as estate planning or the best strategies for claiming Social Security. They have access to a great deal of research from companies and to marketing materials to share with advisers. “Surprisingly, a lot of wirehouse folks are more aware of and take advantage of what wholesalers can offer,” Macken says.

Wholesalers can also assist with life insurance planning, asset management, IRA or tax planning. According to data from LIMRA, 66% of advisers turn to wholesalers for support with income and expense planning for retirement, and 49% of advisers want assistance with Social Security claiming strategies. Forty-one percent of advisers want help with planning for health, Medicare or long-term care. Less frequently called for are strategies for defined benefit (DB) pension claiming or annuitization strategies (21%) or required minimum distribution planning (14%).

Part of the reason advisers may not be aware of all the value wholesalers can add might lie with the actual manufacturers of financial services products, the report contends. Frequently, manufacturers’ primary focus is on which sales team (internal or external) is most efficient, but LIMRA’s report suggests they pay more attention to which wholesalers are actually providing the most value to advisers. “The reality is that both (wholesalers) remain integral in the minds of advisers,” she says. “And while it would certainly be less expensive for companies to rely exclusively on their internal teams, advisers tell us that wouldn’t be providing them with all the solutions they need.”

Some manufacturers continue to experiment with wholesaling platforms and strategies to maximize productivity and efficiency. “Whether it’s a hybrid wholesaling model or a team-based structure, for some companies, the strategy continues to be a work in progress,” Macken says. “And it basically comes down to companies trying to figure out what will work best for all of the parties involved.”

LIMRA, a global research, consulting and professional development firm, surveyed 900 financial professionals for the study and conducted 17 one-on-one interviews.

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