From the September 2010 issue of Research Magazine • Subscribe!

Man on a Mission

Brian Gaffney's career trajectory uniquely puts him in a place where he can do something about the looming retirement crisis.

Brian Gaffney
CEO, Allianz Global Investors Distributors; New York City
What he's about: "I have a passion for seeing people who have been working their tails off all their lives have a fair opportunity to retire with dignity."

Brian Gaffney helped build the 401(k) industry. Now he's out to fix what's wrong with it."The idea that 401(k)s would cause the erosion of the defined benefit plan was no one's intention. The twilighting of [pension] plans is very disheartening. The 401(k) was supposed to be a supplemental, improved employee benefit plan on top of a defined benefit plan. Now with the shift to defined contribution plans, people will no longer be getting guaranteed income. They have to fend for themselves and make decisions about how to finance their retirement," says New York City-based Gaffney, a managing director and CEO of Allianz Global Investors Distributors, the retail distributor for PIMCO, NFJ Investment Group and Nicholas-Applegate Capital Management, among others.

At AGID's helm, Gaffney, 56, is responsible for driving growth for all its asset management entities. Indeed, he has been quite successful at it. For the last two years, the subsidiary of Allianz Global Investors, one of the world's top five asset management companies, with more than $1.7 trillion under management, has ranked first with increased market share and is on track for a third No. 1 year.

Notes Dr. Joachim Faber, CEO of Allianz Global Investors: "Under Brian's leadership, we've produced record sales in U.S. mutual funds at a time when there was tremendous distrust in our industry and unprecedented market volatility."

A social worker during college, Gaffney is passionate about preventing what he calls a "retirement crisis." To that end, last June Allianz launched the Allianz Global Investors Center for Behavioral Finance, stemming from Gaffney's substantial interest in the behavioral aspect of retirement decision-making.

The Behavioral Center, a value-added for Allianz broker-dealer clients, is designed as a place where financial advisors can participate in training sessions and from which research and retirement solutions will emerge. "We hope to have some real thought leadership around how behavioral finance relates to retirement," Gaffney says.

The Center grew out of an eye-opening report -- compiled for Allianz by UCLA professor Shlomo Benartzi, prominent expert in behavioral finance and now the Center's chief behavioral economist -- packed with insight from 10 different academics' research into retirement decision-making.

The professors show, for example, that people are five times more risk-averse as soon as they enter retirement; also, dementia begins earlier than most assume.

"Yet, in many cases," notes Gaffney, "we're forcing people to make decisions about things like annuitization when they're much less equipped mentally to make them. We need to design solutions that can be made earlier in the life cycle."

Gaffney has been observing the retirement dynamic for nearly 30 years now. Formerly a small-business owner, in 1983 he established a 401(k) plan for his 35 employees.

After selling the company, so enthusiastic was he about the 401(k) concept that in 1988 Gaffney got himself hired by Cigna Retirement Services as a 401(k) salesperson.

Now he's irritated at the way the plans have been used and worried that they aren't serving investors' needs. "I'm not happy with what I see. The 401(k) should not have been an opportunity for companies to collect revenue from over-funded plans," he says.

Utica, N.Y.-born, Norwalk, Conn.-bred, Gaffney picked up a B.A. in sociology from Stonehill College in 1979, then proceeded to try a few different industries. First he sold under-wire and seamless, molded-cup brassieres for Warner's. Then he joined Royal Business Machines, soon becoming manager of its Los Angeles office. After that, he co-founded Roycorp Business Machines, which achieved high marks as a leading IBM dealership.

After selling the company, in 1988 Gaffney was accepted into McDonald's franchise program in Lewisville, Texas. While working at the fast-food chain -- required to become a franchisee -- he began cold-calling companies in the pension business, ultimately landing the Cigna job. But at night, he still toiled at McDonald's. ("I was flipping burgers and sweating bullets that my new boss would come through, order a Big Mac and see his new 401(k) salesman behind the counter!")

Gaffney in fact became one of Cigna's top 401(k) salespeople nationwide and politely opted to turn down the McDonald's opportunity. Soon a Cigna regional vice president, in 1993 he joined Neuberger Berman and after six years, moved up to managing director and head of retail distribution. In 2003, Lehman Bros. acquired Neuberger.

Five years later -- in the heat of the financial crisis -- Gaffney left Neuberger to join AGID as CEO. ("It was horrible at Lehman while all that stuff was going on in '07 and '08.") He exited just two months before Lehman's collapse. The timing, he insists, was sheer luck.

"I escaped fully intact. All my stock was acquired by Allianz. But two months later, it would have been worth nothing."

Apart from the challenge of growing AGID's equity side at a time when, he says, "consumers still have cold feet getting out of cash and money markets," Gaffney is pressing on to try to avert the retirement crisis.

"People need to realize it's about how you make decisions. But for the most part," he says, "they don't know how to make investment decisions. This stuff isn't taught in schools. Pensions are gone, though; and if people don't get this right, they're going to have some pretty miserable years.

"We have a lot of work ahead to at least make them understand how much is required to save...They're going to be shocked to find that a $200,000 balance won't do it. This," Gaffney says, "is a huge opportunity to educate people."

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