Getting Into Income Planning

It’s one thing to say that insurers and advisors should give more focus to income planning, but the question is how to do it?

A panel discussion, held here during the annual marketing conference of National Association for Variable Annuities, Reston, Va., looked at three strategies for growing retirement income business.

Income annuities. At Fidelity, “we got a commitment from the top…to own this market,” said Farrell Dolan, executive vice president, Fidelity Investments Life Insurance Company, Boston.

Fidelity Investments Life decided to focus on baby boomers who are transitioning into retirement–people age 50 to 60, said Dolan. It does this with an income planning process that incorporates income annuities in the solution.

Originally, there was no “grand plan that brought us into income planning,” Dolan said. The company first tried selling income products the same way it sold accumulation products, he said. Later, it zeroed in on assumed interest rates in income annuities and still later, on “speaking slowly” or in whatever way that people would hear, he quipped.

But in 2001, Dolan said, Fidelity formalized an income planning process that clicked. It centered on a worksheet that had clients break out essential and discretionary expenses and the sources of income that would cover those expenses in retirement. People liked the process, he says, noting that 38% found they had a gap between essential expenses and sources of income. Of that 38%, there were “40% who bought an income annuity,” he said.

What helped move this forward is the company’s top-down commitment to owning the income planning market, Dolan added.

“We’re focusing on thought leadership, not P&Ls,” he said. Also, the company formed an Income Services Group, which makes monthly reports on what is going on. And, it took a “planning and consultation” approach, with modeling and sophistication built in and with services of both generalists and specialists. More recently, the company expanded its income approaches into the 401(k) market.

Annuitization. Genworth Financial has made annuitization the focal point of its retirement income initiatives, said Pamela Schutz, president and CEO of Retirement Income & Investments, Richmond, Va.

What people want in their retirement finances are guarantees, the ability to outperform inflation and a paycheck for life, she explained. So, Genworth developed products to meet those goals. The first was Retirement Answer, an individual income solution that can pay a person money now, money in 10 years and money in 20 years, Schutz said. Recently, Genworth also debuted Clear Course, a similar product for the 401(k) market.

Both products take an innovative approach to annuitization, Schutz noted. But it’s not enough to have an innovative product, she said. “You’ve got to sell it, too.”