Notable quotes from the Managing Retirement Income Conference

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Speakers expressed some interesting opinions at the Managing Retirement Income Conference on Feb. 10. Their comments are paraphrased below.

  • It’ll take at least two years at 5% equity returns for people to make back what their 401(k) plans lost in the 2008  stock market decline.–Jack L. VanDerhei, Employee Benefit Research Institute
  • Retirement will turn out to have been a twentieth century retirement phenomenon. Fewer people can afford our concept of retirement because of longer lives and all three legs of the retirement stool getting shorter.–Larry Cohen, SRI Consulting
  • Only one in six LIMRA survey respondents have taken action–mostly reallocating balances–related to the economic crisis. Respondents are planning to reduce debt, delay making investments, and reduce plan contributions.–Bob Kerzner, LIMRA International
  • A tremendous demand for financial advice is coming, but people lack confidence in financial advisors.–Bill Dwyer, LPL Financial Services
  • Top earners might be willing to give up receiving Social Security payments, which they don’t need, in return for not paying more for Social Security–John Murphy, Oppenheimer Funds
  • It’s a myth that income annuities reduce liquidity and your children’s inheritance. Used properly, they can allow your assets to grow. –Steve Deschenes, MassMutual
  • There are three categories of managed payout funds: perpetual horizon endowment, horizon targeted self-annuitizing, and dollar payout targeting.–Richard Fulmer, Russell Investments

Related post: “Highlights from the Managing Retirement Income Conference”


Highlights from the Managing Retirement Income conference

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The stock market’s decline has changed how individuals look at retirement income. They want more certainty. That was one of the themes I took away from the first day of the Managing Retirement Income Conference on Feb. 10. The conference was hosted in Boston by the Retirement Income Industry Association.

Some other takeaways
1. Retirees–and pre-retirees–are concerned about becoming a burden on others in retirement.
2. Advisors will have to change to accommodate Baby Boomers’ lifestyle and income needs. 
Desire for certainty vs. the cost of guarantees 
The desire for certainty means that individuals are becoming more willing to give up control of their investments in return for a guaranteed stream of income, said Robert Kerzner, president and CEO of LIMRA International.

Guarantees of principal or income were a theme of many product presentations at the conference. For example, Brian Perlman, partner, Mathew Greenwald & Associates, made a case for target date funds with a guaranteed minimum account balance (GMAB). He suggested that guarantees should go into effect five to 10 years prior to retirement. Perlman said a GMAB would reassure investors and make them comfortable about investing a higher percentage of their assets in equities, which is necessary to give them a better shot at meeting their retirement income needs.

The SunAmerica High Watermark Funds offer a GMAB, according to an audience member. They may be the only such funds currently on the market, though Perlman said more are in development. These funds came up again in a presentation on managed payout funds by Juan M. Ocampo, Trajectory Asset Management, subadvisor to the High Watermark Funds.

However, said Kerzner, demand for guarantees is ratcheting up just as the credit crunch and stock market decline are forcing insurance companies to reassess their risk tolerance and pricing. Synthetic annuities may be one solution, he added. Oppenheimer Chairman John Murphy, who also chairs the Investment Company Institute, said there’s a question of how much risk a provider wants to take and at what price. 
“I don’t want to be a burden” 
Financial services firms are obsessed with their products instead of meeting people’s needs, according to futurist Bruce Sterling. Old people say “I don’t want to be a burden,” not “I want a million dollars,” he added. Sterling recommended that financial professionals seek opportunities to provide “de-burdenizing” services.

Sterling posed a dilemma to the conference attendees. If you had to choose, would you rather have a really good financial advisor? Or would you rather have Google or Facebook or social networking?

Advisors must change
Many financial advisors could do a better job of communicating with their clients. According to LIMRA consumer survey research cited by Kernzer, only 15% of respondents had been in touch with their clients during the current crisis. Two-thirds of those consumers initiated the contact. 

Oppenheimer Funds is directing some of its marketing efforts to helping advisors talk to clients. Advisors want to know how to approach client reviews and start conversations with clients, said John Murphy. More communication will raise client confidence, he added.

Ann Connolly of Deloitte Consulting said that as retirement income provide more unbundled products, the role of the advisor will be critical. Individuals will look to their advisors to assemble the right package for them. But these products can be bewildering. Advisors will need modules of advice, new financial modeling tools, and consolidated retirement management accounts.


 

"Amid Market Gloom, Fund Manager Fights Against Jargon"

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Are you using too much jargon in your market commentary? 

Read “Amid Market Gloom, Fund Manager Fights Against Jargon” for the tale of a British fund manager trying to eliminate jargon and wordiness.

Here are most of the terms he’s fighting:

  • Aggressively
  • Backdrop 
  • Basis points
  • Bets
  • Drawdown
  • Going forward
  • Is primarily engaged in
  • Headwinds, tailwinds
  • Musings
  • Names
  • On the back of
  • Perfect storm
  • Space

Some of these are okay with me. “Headwinds” bothers me the most. The article suggests “positive trends” as an alternative. “Basis points” is one of my pet peeves.

What investment jargon are you battling?


To "dear" or not to "dear" in your email

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What salutation should you use to start a business email? 

  • Dear? 
  • Hello? 
  • Something else?

I typically open with the person’s name followed by a comma. Like this

Susan,

This is how 95% of my business correspondents start their emails.

Some people use “Dear,” then the recipient’s name. That’s essential for a business letter, but it’s too intimate for a business email. At least, that’s how it feels to me.

I was surprised to see that the authors of Send: Why People Email So Badly and How to Do It Better argue for using “dear.” They don’t like my approach. They say:

For some reason, people who would never in a letter write “Jim” or “Bob” or “Mr. Smith” with no introductory word beforehand feel no hesitation in doing so in an email…. But it strikes us as rude to bark out someone’s name like that, even in an email, especially if you don’t know your correspondent.”

I reserve “Dear” for my correspondence with friends. Or for replies to emails in which I’ve been addressed as “Dear Susan.” I think it’s usually appropriate to echo the salutations used by the person with whom you’re corresponding.

I don’t have strong feelings either way about starting an email with “Hello” and then the name of the recipient. If Allan emails me with “Hello, Susan,” I’ll “Hello, Allan,” back to him.

If you read my “Should you say ‘No’ to ‘Please,’ ” you’re probably not surprised to find me disagreeing with the authors of Send, as did most of the respondents to my reader poll on the use of please in emails.

So, how would you address an email to me? Would you use one of the following salutations?

  • Dear Susan:
  • Dear Ms. Weiner:
  • Hello
  • Hi
  • Hi, Susan
  • Ms. Weiner,
  • Susan,

 

"Financial services marketers must restore trust"

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In the current environment, small business “decision makers are much more likely to choose the safe choice over the best choice,” according to Gal Borenstein of The Borenstein Group, interviewed in “Financial services marketers must restore trust” in DM News. 

That may mean picking a bigger, seemingly more stable financial services provider over a smaller provider.


What you’re missing if you don’t blog

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Financial planners who don’t blog are missing out on a great opportunity to connect with prospective clients, according to “Social media in financial planning — the sweet spot and the sweet gap.” Why? Because many of your most desirable prospects read blogs.



On the other hand, if you do blog, you’re in a minority. Apparently fewer than 1% of financial planners blog, according to research from Kahuna Content.


Thanks to Bill Winterberg for bringing this information to my attention.


Using your client’s house to explain the market

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I like this example of plain talk cited in Eric Rasmussen’s “Who Ya Gonna Call?” in Financial Advisor Magazine (Dec. 2008).

Michael Kresh of M.D. Kresh Financial Planning uses a down-to-earth image, as Rasmussen describes.

To explain the market to clients, he asks them to imagine what would happen if they were forced to sell their house in 24 hours: A home worth half a million dollars would suddenly plummet to about $100K. And that’s just what’s going on with the stock market.

Tips for streamlining your writing from the Word Wise blog

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Shorter is almost always better when you write.

Check out “One (Isn’t) the Loneliest Number,” a list of phrases that can be replaced with a single word, from Dan Santow’s Word Wise blog.

It’ll teach you to use words like “now” instead of “at the present time” or “at this point in time.”

Would you "robo call" your financial planning clients?

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I wouldn’t.

I winced when I saw “robo calls” among the crisis communications tools recommended by a marketer who shall remain anonymous. This person suggested using robo calls to invite financial planning clients to a quickly organized meeting or conference call at a time of crisis.

Robo calls. Those automated, pre-recorded phone messages that jam up my phone line even after I hang up. I don’t care what their topic is. I do not want to be robo-called.

But is there a good alternative for speedy communication with many people? If you’ve got 300 clients, like some investment advisors I’ve known, it isn’t practical to call each one individually. Letters aren’t fast enough. Email blasts require that you have email addresses for all of your clients–and that they pay attention to email. 

Maybe robo calls would be okay if you get your clients’ permission in advance to use this method only in times of crisis.

What do YOU think?

"50 Things Your Customers Wish You Knew"

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“50 Things Your Customers Wish You Knew” by Sonia Simone  on the Remarkable Communication blog gives you some great insights into your clients.

Client opinion #10 is: “I don’t understand a lot of the messages you send me. Can you make them clearer?” That resonates with me.

I wonder about #16, “The wealthier I get, the more I like free stuff.” Is that true of your clients?

How about #34? “I have the attention span of a goldfish. Go too long without contacting me and I’ll simply forget you exist.“

Most important of all, at #50: “It really is all about me.” 

Can you add something to this list that’s specific to clients of financial advisors? 

I found “50 Things” thanks to “Top 10 Blog Posts for Writers (The Best From The Best in 2008!)”  by Michael Stelzner.