From the October 2008 issue of Boomer Market Advisor • Subscribe!

2008 Forward Thinking 5 Update

The competitor - Larry Roth
Ah, the joys of the monthly magazine business. As this goes to print, the U.S. government has an 80 percent stake in AIG. Let's face it, to say AIG has had a rough year is like saying Beijing is a bit crowded. But the CEO of the insurance behemoth's broker/dealer network is doing his best to stay positive about the four firms he oversees. The hyper-competitive Roth won't let a little thing like the economy slow him down.

"The market's been rough going," Roth says. "But we're doing much better than anticipated. Our broader business is down, but not by much."

A big plus in the AIG arsenal in 2007 was the revenue generated from existing advisors.

"Same store sales, which are one way we measure it, have been the strongest we've seen," Roth said when we first spoke with him. As a result, AIG Advisor's Network continues to concentrate on keeping their current advisors happy. And the investments it's made recently, particularly in technology, are paying off.

As for the future, AIG will continue to take a holistic approach to serving advisor -- and by extension -- client needs.
"We need to be able to serve transaction-based advisors, fee advisors and everything in between. We want smart, high quality business people and entrepreneurs that also happen to be financial advisors."

Of course, this depends on how it all shakes out with the parent corporation. Visit for continuing coverage of what Wall Street volatility means to your boomer clients' retirement.

The innovator -- Brian Shea
We just happened to talk to Brian Shea on that same Monday that the mother of all Wall Street trifectas took place; Lehman's bust, Merrill's sale and AIG's ... well, we weren't sure what at the time. But Pershing's president and COO -- while concerned -- wasn't all that shaken.

"We'll stay focused, we're not distracted by what's happening," he said. "Pershing is viewed as a safe haven. We're well-capitalized and have the Bank of New York Mellon behind us. We've continued to grow, and our customers have continued to grow, throughout the year. What this does is allow us to gain market share from other firms that are distracted by what's happening."

Shea says cutting-edge technology rollouts continue to be a focus for the firm, which has spent $300 million thus far. When we spoke last year, he believed offering HSAs would become a necessity for comprehensive advisors, and he still believes it.

"We have a relationship with two HSA record keepers, and that trend will continue. We see the independent advisor channel as one the fastest adopters of the HAS product."

In the managed account space, Lockwood now offers a guaranteed income solution of the kind Curian CEO Michael Bell describes (see Bell's comments below).

"As we know, aging boomers need some sort of guaranteed income, and we can now provide it with a lot more flexibility."

The Advocate -- Michael Bell
Quick recap of our previous conversation with Michael Bell, CEO of Denver-based separately managed account firm Curian Capital:

Traditionally, said Bell at the time, clients look to annuities, reallocated to larger fixed income positions or used a laddered approach to getting their required protection and income. To capitalize on boomer longevity and income needs, managed account firms are responding by marrying asset management with insurance into a new hybrid product. Financial insurance, as Bell coined it.

"The market is ripe for it, and many of the larger firms are looking at this now. The key players will be the firms that can package these hybrids and get them to the street in the next 12 to 18 months. The timing is critical, and if it can be done in that time frame, it will be those companies that dominate."
Twelve months later, is he starting to see these products?

"We are in fact starting to see them, and they're coming in many flavors. We're seeing pure asset managers teamed with insurance products. And we're seeing the proliferation of payout and income funds come on line. Investor demand will drive further development in the product space."

And Curian is gearing up to take advantage. In September, the firm announced it is adding 21 associates (one divisional VP, 10 internal regional business consultants and 10 external regional business consultants) to its distribution force.

The Advisor -- Alexandra Armstrong
When we spoke last year, we asked Alexandra Armstrong for 2008 predictions, and she was very specific. She hasn't changed. It's this attention to detail that got Armstrong ranked among the top 100 financial advisors in the country by Barron's and The Winner's Circle. The chairman of Washington, D.C.- based Armstrong, Fleming & Moore has been in the investment field for more than 40 years, and in 1977 she was the first person certified as a financial planner in Washington, D.C. So how is she reacting to the proverbial market headwinds?

"We're staying the course and sitting tight," she says. "Nothing much different. I did say when we last spoke that I'd be looking to do more with annuities, and we have done a bit more, but not a whole lot more."

On the subject of taxes, she said at the time: "One of the most likely predictions will be higher taxes," she says. "We might not get [Congressman] Charlie Rangel's exact bill, but we'll get a variation of it."

And now?

"Lower employment means lower tax revenue, so no matter who wins in November, he'll have to raise taxes. So we're advising our clients to take capital gains now."

The builder -- John Murphy
In addition to his role as chairman and CEO of mutual fund giant OppenheimerFunds, John Murphy is the chairman of the Investment Company Institute, the fund industry's research and lobbying arm.

2008 initiatives included the creation of a retirement security task force and the defense of 12b-1 fees, which he said would go a long way if they were just called what they really are, a fee for advice.

"They give people access to professional services that they could not otherwise afford. I don't think it will help anyone if we completely do away with them."

But as far as actually seeing resolution with the 12b-1 issue, "It could be tomorrow or next year," Murphy now says.
His greatest challenge as head of ICI?

"I wasn't prepared for the level of partisanship in Washington," he says. It doesn't matter what the issue is, Republicans and Democrats just line up against each other."

And his greatest success?

"We successfully defended 401(k)s from unnecessary changes, and our input on the Pension Protection Act was certainly one. I think that's a theme for a lot of our accomplishments. We can almost measure them more by what we prevented from happening."

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