VAs Put A Floor Under The Retirement Plan

Insurers control only about 12% of the IRA rollover market today, pointed out panel moderator Cynthia DiBiase Vogl, president and CEO of NFC Consulting Group, a Chicago affiliate of Talbot Financial Corp. By contrast, mutual fund companies control about 49% of the market and brokerage firms about 32%, she said.

But insurers should not despair, Vogl said, explaining people still need the things insurers provide, such as advice, appropriate products, income planning, asset protection and estate planning.

Looking ahead to the year 2030, about 76% of retiree income will be in a volatile state, said Drew Denning, citing figures from the Employee Benefit Research Institute and Cerulli Associates. “What can we do to mitigate that?” he asked.

At Principal Financial Group, the Des Moines, Iowa, company where Denning is a director in the retirement and investor services division, this question led to development of an IRA rollover program focused on 3 areas:

? Provide 401(k) clients with education and tools. One example is a brochure for employees within 15 years of retirement. This aims to shift the employees mindset from accumulation to payout, Denning said. Another example is a retirement income planning guide for employees within 2 years of retirement. This offers multiple funding options and a holistic approach, he said.

? Provide a stronger internal focus on retirees. For example, the company has “dedicated” 401(k) counselors for age 50 and up, as well as dedicated internal wholesalers, he said.

? Offer a full array of financial solutions. There is “no single product solution” for retirement income, stressed Denning.

At Merrill Lynch Insurance Group, the approach to annuities and using them for IRA rollovers started with recognizing that “for reps, annuities dont really fly,” said Christopher Grady, first vice president-distribution in the managed assets group.

But the firm also decided it “had to have a strategy to solve the clients [IRA rollover] problem, regardless of what is going on in the market.”

The outcome was a plan founded on 3 key elementsimproving the financial advisors experience (via electronic order entry and other streamlining measures), distribution structure (with key partners focused on the advisor and products from a variety of annuity carriers that offer living benefits and other popular features), and data mining (to help receptive advisors grow their annuity business).

Some advisors will never sell annuities, conceded Grady. “But some will.”

Annuity sales for Merrill Lynch grew to nearly $5 billion in 2003, he noted. Thats up from $1.7 billion in 1997.

Reproduced from National Underwriter Edition, April 2, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.