PA: How has Franklin Templeton grown its success in working with retirement plan advisers?
Doshier: First, as kind of a backdrop around retirement for Franklin, we are a global firm. Actually, almost 40% of our net flows now come from outside of the United States. That’s important because the challenges around retirement aren’t a U.S.-only set of issues. We see those difficulties across the globe, whether they be in Europe or Asia or in the United States or Canada. We bring both an institutional view—for instance, defined contribution (DC) plans and our defined contribution investment only (DCIO) offering there—as well as a retail view, helping advisers on a wealth management side to manage those relationships, whether they be in individual retirement accounts (IRAs) or post-work.
We bring all of that together to really inform how we think about DCIO. So, we have relaunched our target-date funds (TDFs), LifeSmart, within the last 24 months, and we think that’s the next generation of target-date funds. They are very specific to a “to retirement” glide path; they are very thoughtful in the shape of the curve, to manage risk at the appropriate time but also be more aggressive at the appropriate time from a growth perspective.
We also think we’re wrapping these things—beyond the name of the product—in a very innovative way, just by staying true to three principles: being practical, being simple and being aspirational. Far too much of the history of retirement marketing, in my opinion, has been very fear- and negative-based. We’re trying to show what’s possible, we’re trying to show how you can talk about the fund in simple terms so that not only the end investor, the adviser’s client, but also the adviser himself can find a whole new way of talking about it and managing it so that he has a better relationship with the customer.
PA: Are the advisers accepting this new, fearless approach to positioning?
Doshier: Yes, absolutely. We launched this positioning, called “Income for What’s Next,” a year ago. Since then, we’ve seen huge uptake in our materials, which are designed to help advisers engage with their clients, whether they be plan sponsors or retail customers, help them to plan better for what those portfolios need to look like during distribution as well as accumulation. We want to help them be better at portfolio construction so that they can think about portfolios not only on the accumulation side, but what’s going to happen after that retirement date and during that distribution. It’s an integrated view that I think does change the mindset, and the early returns we’re getting are very positive.
PA: Your whole focus is on creating the optimal allocations, moving to a really efficient glide path, is that right?
Doshier: Yes, exactly. You can’t have a fundamental conversation about glide path asset allocation on the accumulation side without understanding its ultimate use from a distribution standpoint. There’s a lot of talk in Washington, which we’re very active in, about whether or not defined contribution plans today are literally savings plans or retirement plans. We believe that they are retirement plans, but there are some things that need to be done to assure that those income streams coming out the back are managed effectively.
PA: So, Michael, talk to me a little bit about direction in the industry. Where do you see the industry heading? And then, specifically, where is it heading for plan advisers?
Doshier: I think the biggest issue that the industry is facing right now is driven by nothing other than the classic age wave of the Baby Boomers. We’ve put all this time and effort into helping more people accumulate, accumulate more effectively, start early, save often, asset allocate appropriately. All of those conversations are great, and we need to continue to facilitate those, but we haven’t paid attention to the back end of all of this. How do people live off of these accumulated assets in their defined contribution plans or other retirement accounts?
Our focus right now is on helping accelerate those back-end conversations around retirement income. I even hesitate to say the words “retirement income” because, historically speaking in the United States, that’s been associated with a singular product view. We don’t talk about it that way. It’s a much broader conversation that is product-agnostic. It’s about taking all of the science that we have developed over the last 50 years of portfolio construction for the accumulation side and starting to think about it from a distribution standpoint. How do you get the average person in the United States—who does not have access to a pension plan—to understand what his benefits are from Social Security, and then lay on top of that a portfolio that will deliver durable income for 20, 30, even 40 years of retirement?