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?


Top five types of freelance writing for CFA charterholders

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In tough times, CFA charterholders are getting creative about their job options. That’s undoubtedly why the January 2009 panel on “Alternative Careers for CFA Charterholders” that I organized for the Boston Security Analysts Society was well attended. Freelance writing is one non-traditional option. In this blog post I discuss five types of writing.

1. Investment performance commentary for institutional portfolios or mutual funds
Reporting and explaining a portfolio’s investment performance is an important component of client service. In the case of mutual funds, annual and semiannual reports are mandated by law.

In my experience, this is the freelance writing gig that requires the least writing skill because reports follow a strictly defined model. There’s no room for individual creativity. It’s more important that you understand attribution analysis and other components that feed into reports. You should also be accurate and detail-oriented.

2. Company reports for websites or newsletters
Lisa Springer, CFA (lisa AT beaconequityresearch.com), says

The great thing about writing for a newsletter or website is it’s steady, predictable work, typically involving weekly assignments. In most cases, they pick the stocks they want you to write up. Most jobs are free-lance and permit telecommuting. I think there are probably more opportunities out there writing for websites than for print newsletters since most newsletters are 1-2 person operations.

Here’s her advice on finding opportunities:

This is not the best time to be looking for this type of work since ad revenues are way down and the investment web sites are mostly ad-driven. There is also a trend towards smaller “sound bytes” (100 words or less) rather than 500-800 word articles. Still, sites like Motley Fool and Street Authority were recently hiring free-lance writers. I’ve also found opportunities on free-lance writer boards, contacting sites that interest me directly (just google investment web sites and you will find hundreds of sites) and even on Craigslist.

3. Market commentary
Market commentary requires a mix of writing skill and investment knowledge. Sometimes clients want you to write commentary from scratch, reporting your own opinions and statistics. Other times, they’ll want you to interview their investment professionals to reflect their take on the market.

4. White papers
The ability to identify the client’s problem and write persuasively about it is key to a successful white paper. White papers are a cross between an article and a brochure. They typically pose a problem faced by clients and tell how to solve the problem. While the solution is offered by the company commissioning the white paper, the most credible white papers don’t overtly flog their products.

Information for your white papers may come from different sources: your own research, materials provided by your client, and interviews with experts at your client’s firm.

5. Articles and books
Of the five kinds of writing discussed here, articles and books require the highest degree of writing skill. They may also expose you to clients who don’t understand your topics. Writer Annie Logue, CFA, author of Socially Responsible Investing for Dummies, says “editors don’t always understand finance. If you can make it understandable to the editor, you can make it understandable to anyone.”Writing for individual investors may force you to work hard to describe your topic in less sophisticated terms.

Writing articles and books also requires the ability to develop story ideas and pitch them to editors. That’s something you don’t typically do with corporate clients.

Resources for freelance writers
Freelance writing isn’t just about the mechanics of writing.  As Logue says, “You have to spend time on marketing, information technology, accounting, etc.”

A number of websites and blogs offer advice, classes, and other resources for freelance writers.

Investment Writing blog posts:

 

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.


provocative quote about target date fund (TDF) advisers

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Are target date fund advisers swayed by a conflict of interest?

On p. 41 of CFA Magazine (Jan./Feb. 2009), Mark Ruloff, director of asset allocation for Watson Wyatt Investment Consulting, says, “Advisers…are implementing the glidepath. They might have a bias toward keeping higher equity allocations longer because it helps their own fees…. There are legitimate reasons for advisers to arrive at different glide paths, but there’s the appearance of a conflict of interest.”

What do you think?


Eaton Vance, Evergreen, and FRC on "Communication Strategies for Good Times and Bad"

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Mutual fund companies are ratcheting up their communications, as you might expect in challenging  times. I learned some of their strategies in a panel on  “Communication Strategies for Good Times and Bad” with speakers from Eaton Vance, Evergreen Investments, and Financial Research Corp. They spoke at NICSA’s East Coast Regional meeting on January 15.
Social media on the rise 
I was struck by how companies are using–or considering–communication tools such as webinars and social media that barely existed five years ago, back when I worked for Columbia Management Group. 

Social media is impacting every brand and how firms need to communicate, said Stephen J. Barrett, chief marketing officer and managing director, Eaton Vance Distributors. He suggested that you search for your company name on Facebook. (By the way, when I searched “Eaton Vance,” I found several people named “Vance Eaton,” but also a number of people who might be Eaton Vance employees.)

Barrett is thinking about how to leverage Facebook and other social media. “We need to enable people using social media networks to share our content and to use it build their own content.” 

None of the panelists’ firms are currently blogging, though Evergreen’s parent company, is involved in the Wells Fargo-Wachovia Blog, which allows readers to leave comments. 

Even if your companydoesn’t blog, you should be searching on its name in the blogosphere using tools such as Technorati or Google, said panel moderator Bill Blase of W.T. Blase & Associates. He has seen issues that companies could have “gotten in front of” if they’d learned about the issues through blogs.

More frequent internal communications 
At Evergreen Investments, Laura Fay, senior vice president, corporate communications, said the best time to connect with your employees is a time like now, when morale may be low, she said. Employees feel better if they hear frequently from senior management.

Evergreen is using the following tools for internal communications:

  • Monthly newsletter or business update
  • Quarterly summary of financial information
  • Quarterly video available on employee desktops
  • Town hall meetings, held in four primary locations and available via webinar; employees can submit questions anonymously

The challenges of faster communication
Companies need to communicate more quickly, which is pressuring them to get things approved quickly. “Out in two days and very, very good is much better than out in five days and perfect,” said Barrett. 

That’s not easy when you’ve got to win approval from both portfolio managers and your compliance department. “Getting out quarterly commentary can be torturous,” said Fay.

It’s also challenging to create communications that serve both financial intermediaries and their clients. Financial advisors tell the researchers at Financial Research Corporation (FRC), “don’t dumb it down,” but they want to share fund companies’ content with their clients, said Craig Kilgallen, director of FRC’s ADVISOR INSIGHT. That adds to the difficulty of getting compliance approval. Also, as Barrett said, “If you talk about negative convexity in a client brochure, you’re probably going down the wrong path.”


Visit the Tax Policy Center for analysis of stimulus package

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The Tax Policy Center offers report cards and other resources to help you understand the economic stimulus bills.


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.

"Making Sense of the Dollar"

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The U.S. economy is in better shape than you think. It may even start coming back in the second half of 2009, and the dollar will end 2009 higher versus the euro and yen.

At least, that’s the optimistic outlook Marc Chandler, Brown Bothers Harriman’s global head of currency, set forth in his keynote address at NICSA (National Investment Service Company Service Association) East Coast Regional Meeting on January 15, “Making Sense of the Dollar.”

The U.S. will emerge from this crisis stronger than before, just as we emerged stronger from World War Two and subsequent crises, Chandler told his audience.

Continue reading my article, “Making Sense of the Dollar: The U.S. Will Lead the World Again” in Advisor Perspectives.

Take advantage of a 20% discount on the Managing Retirement Income conference

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You can save 20% on your registration for the conference on “Managing Retirement Income: Creating Solutions to Manage Downside Risk and Adapting Strategies to Preserve Retirement Income in a Shifting Economy” that will be held in Boston, Feb. 9 to Feb. 12.  The discount code should automatically fill when you click on the link above. If not, enter this code:XU2358IW

I’m just passing along this information. I don’t benefit financially if you use the code. But let me know if you plan to attend. Perhaps we can meet during one of the coffee breaks.