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AARP To NAVA: Let's Work Together

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“Divided we fail; together, we can accomplish anything.” That was the message Bill Novelli brought here to the annual meeting of NAVA Inc., Reston, VA.

The executive director and chief executive officer of AARP Services, Inc., Novelli was a keynote speaker for the NAVA annual. AARP Services is a wholly owned subsidiary of AARP, Washington, and manages the products and services offered to AARP members.

His message was one of collaboration. He said AARP would be pleased to work with NAVA on suitability guidelines and other areas regarding financial security.

Novelli’s collaborative words parallel the message AARP has been forwarding jointly with 2 other organizations–the Business Roundtable and SEIU (the Service Employees International Union)–on the subjects of rising health care costs and concerns about quality of care.

But future financial security is a big issue too, he said, noting this issue is linked to health care problems in the United States. Health care has a big impact on financial security, he explained.

Where financial security is concerned, “we need to promote greater savings,” he said.

Regarding suitability, he said “it’s in everyone’s interest to get the right product to the right person and to make sure there is adequate disclosure.”

Hence, AARP’s interest in working with NAVA, which shares similar convictions.

Baby boomers, who will start retiring in large numbers in 2011, “are not prepared adequately for the long futures,” he said earlier in his speech.

Some boomers are treating their homes like ATM machines, he continued, and others carry substantial credit card debt. Still others are caring for aging parents, and they are absorbing expenses the boomers had not anticipated.

Meanwhile, there have been declines in saving at the workplace, he said. And some people are not investing or, when they do invest, “they get poor results.” Another concern is that people “find investing more difficult than it needs to be, so they stumble and make mistakes,” he said.

In response, AARP has been supporting auto IRAs and auto 401(k)s, he added, in reference to automatic enrollment programs.

His firm also wants to influence the marketplace, he said. In 2005, that goal spurred the organization to form AARP Financial Inc., a subsidiary that oversees AARP-endorsed financial services and offerings. AARP has since created its own mutual funds, Novelli said, with simplicity in mind. The materials are written in simple English; there is no fine print; there are no commissions; and there are no hidden fees. The products also have a low cost to invest: $100.

AARP learned some lessons from being in the market, he said. These include: keep it simple, be patient (“it may take a year for a person to decide to buy,”) make it obtainable (with “lower barriers to entry”), and make it easy. Of the last point, he noted that 20% of the fund accounts were opened online–a figure he described as surprising.

AARP applied those lessons to its next initiative, said Novelli, referring to its AARP Lifetime Income Program with New York Life. This program offers fixed indexed annuities. It uses simple English enrollment forms, has a low minimum buy-in ($5,000), and allows a one-time cash withdrawal without penalty. Its suitability guidelines are “comprehensive and easy to understand,” he said pointedly.

Novelli’s collaborative message may find receptive ears since NAVA already works with many other organizations.

In 2002, it spearheaded formation of the National Retirement Planning Coalition, which now has over 10 organizational members. More recently, it fostered collaboration between multiple interests on its straight-through processing project for annuities, striking up a strategic alliance with the Financial Services Institute in July 2007, allowing the STP initiative to be extended to independent broker-dealers and independent financial advisors. NAVA has also worked closely with the American Council of Life Insurers, Washington, on model disclosure guidelines–a strategy which Novelli commended during his speech.

Clifford Jack, NAVA’s incoming chairman, said NAVA will continue its collaborative efforts in the coming year. That is “paramount to our success,” said Jack, who is executive vice president of Jackson National Life Insurance Company, Lansing, Mich.

Outgoing chairman Pam Schutz noted that the aim of NAVA’s collaborative efforts is to leverage each other’s strengths and speak with a united voice. Schutz is executive vice president of retirement and protection for Genworth Financial, Richmond, Va.


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