Is The Industry At The Center Or The Edge Of Retirement Planning?
The entire financial services industry is beginning to gear up to tap the huge market that will develop when the baby boomer generation reaches retirement age over the next few years.
We have seen estimates that the amount expected to flow out of qualified retirement plans alone will equal many trillions of dollars over the years this huge population segment reaches retirement age. While this is certainly a great opportunity for the providers of retirement products, we wonder if the life insurance industry is going to be the hub of this retirement bonanza, or merely one of the supporting spokes.
The annuity industry has commissioned studies that clearly demonstrate the importance of including an annuity as part of anyones retirement package. No other product guarantees that retirees and their funds will run out at the same time they do. However, merely providing useful products to supplement retirement may not be enough.
Admittedly, retirement planning is a complex subject. “One size” does not necessarily fit everyoneeither in the purchase of clothing or of retirement products.
Yet, browsing various Internet sites to see what is available to help consumers with retirement planning provides an important reality check. Some sites are very good, others are unduly simple-minded, and even more seem to take the “one size fits all” approach.
With some Web sites, no matter what information is provided, the output is always that the consumer should buy the particular products that the sponsor sells.
In this information age, it seems strange that it is difficult to access information that will afford prospective retirees the ability to trace methodically the elements necessary to plan for retirement. The Web will give you step-by-step information on how to build bombs, but step-by-step information on how to convert your lifes savings into a secure retirement is more difficult to extract.
It is even difficult to get information that demonstrates how much a person actually needs to provide a secure retirement.
The life insurance industry is at a crossroads. It either can be merely a support spoke to the retirement process in this country, or it can be the hubthe central player in this huge developing market.
What is needed? The industry should support the efforts of its trade associations that are trying to develop consumer-friendly retirement planning Web sites. These are sites that enable retirees to access step-by-step procedures for determining what they need for retirement security and how to implement the steps once they are determined.
We do not believe any one insurer can be as effective in providing such a service as can the more generic approach that can be provided by the trade associations. Consumers tend to display a profound suspicion of programs that seem to promote a particular product as opposed to programs that promote specific concepts, leaving consumers and their advisors to select the necessary products.
The National Association for Variable Annuities, Reston, Va., has published retirement guides previously that are valuable sources of information. It is now necessary to proceed from providing general information to providing step-by-step specific information that can be related to individual needs.
A meaningful retirement planning tool would be one that enables consumers to input information about a variety of factors that affect retirement planning. The life insurance industry certainly has the resources to be able to develop programs that will enable data gathering in areas shown in the box. In addition, there are a myriad of other factors that retirees need to consider in their step-by-step approach to retirement planning.
There is also a need to help consumers to understand the changes retirement will bring to themnot just the financial changes but also the lifestyle changes that are so profound to people as they age.
Certainly, the life insurance industry has access to information about all of the elements of aging and retirement, not merely mortality and the effects of inflation and compounding of interest. This is invaluable, especially since the complaint often arises that there is no users manual for the aging person to consult to know what to expect.
The point is that retirement planning certainly can include more than just tables and charts.
If potential retirees, regardless of their retirement planning stage, can access an industry Web site that leads them to begin the retirement planning processfree from attempts to sell them particular productsthe life insurance industry will be a direct beneficiary of the process.
Such a Web site will not only create an awareness of the need for retirement planning, it will also help people to understand the critical role that longevity has in effective retirement planning. After all, the life insurance industry still has the exclusive rights to the single most effective retirement planning productthe annuity.
Once consumers become educated about the retirement process, they will be able to bridge the gap to select products that are most suited to accomplish the goals they have set for themselves.
If the various elements of the life insurance industry can cooperate to provide meaningful and unbiased information to the huge numbers of people who will be retiring with huge amounts of retirement assets over the next few years, it will not only help people to achieve their critical goals, but it will improve the entire image of the industrywith the public, with regulators and with legislators. Then, the industry will be the hub, not just one of the spokes.
Norse N. Blazzard, JD, CLU, and Judith A. Hasenauer are principals in the Westport, Conn., and Pompano Beach, Fla., law firm of Blazzard, Grodd & Hasenauer, P.C. Their e-mail address is: Norse.Blazzard@BGHPC.com.
Reproduced from National Underwriter Edition, July 29, 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.