Macchia: Bob, the first thing I’d like to ask you about your job heading up the Retirement Strategies Group within the MetLife enterprise.
Sollmann: About two and-a-half years ago, our Chairman and CEO Rob Henrikson, to whom I report, asked me to lead MetLife’s efforts to capture the global retirement opportunity. With that mission in mind, we created the Retirement Strategies Group, which has enterprise-wide responsibility for focusing and driving our retirement income business in close partnership with our lines of business. Our two largest operations are our retail and institutional businesses. We’re also in retail banking and auto and homeowners insurance, and have a rapidly growing international business.
Macchia: When I think of MetLife, I think of a vast, global, multifaceted corporation with all of these complex businesses you mention. So, I wonder if across this vast enterprise there is a single consistent definition of what retirement means?
Sollmann: The way we look at our retirement business is from the perspective of the individual’s stage of life relative to retirement. Up until recently, the focus of retirement-related businesses has been on the accumulation phase. We have turned our attention in a significant way to helping those who are transitioning into retirement or recently retired – - the so-called retirement income opportunity. We refer to our target as those individuals who are either “launching” their retirement – which could also include someone who has retired within the last two years who hasn’t done the proper amount of planning – and those who are “navigating” their retirement, meaning they have retired yet want to work with someone who will keep them on track as their needs change throughout retirement. We know retirement planning is not once and done.
Macchia: True. You know, I’ve been involved with retirement income distribution basis since 2003 when Wealth2K introduced its first retirement income solution. And I learned early on that the strategies for investment, for tax management; the techniques needed to properly place a retiree’s assets into a distribution mode, are inherently different than the investing techniques we use in accumulation. Is this something that you recognize and, if it is, how do you drive that realization throughout an organization like MetLife if in fact it’s a challenge at all? Perhaps it’s not.
Sollmann: You are absolutely correct in that it’s a very different set of issues. Here’s a way, David, that we like to talk about it. If you think of the tasks at hand for people still in their working years, they are primarily about making the right asset allocation decisions and optimizing return on investment, or ROI, right?
Sollmann: In retirement, the job is very different. The job is about generating, maximizing and sustaining a reliable cash flow for the rest of your life. It’s about reliability of income, or what we call the ‘new ROI’, and it’s what drives all of our thinking. In retirement, individuals can no longer just focus on their ‘bag of cash’ – what they’ve saved and invested for retirement. Their job is now figuring out how to turn that bag of cash – their assets – in a reliable, sustainable stream of income, a job that’s easier said than done. It’s an issue that individuals and the industry as a whole are wrestling with.
To your question about how we drive this new focus in our organization, it starts right at the top of our company with Rob Henrikson, who is incredibly passionate about the retirement income opportunity and MetLife’s ability to capture it. The job of the Retirement Strategies Group is to help Rob drive that passion and focus throughout the organization, and in a way that leverages the strengths we have within and across our lines of business. The Retirement Strategies Group doesn’t sit within any particular line of business – we work across the businesses. In partnership with the businesses, we develop, test, and refine specific strategies, identify innovative cross- enterprise opportunities, and ensure execution of those strategies through our businesses.
Macchia: I’d like to go back to the earlier part of your answer where you talked about driving the awareness of how complex and challenging retirement is at the investor level. It seems to me – and this is both fascinating and frustrating to me – that over recent years I’ve seen what I would call an institutionalized impediment to the extent that people rely upon advisors. Because among many of the largest distributors – even some of the most prestigious distributors – I think there sometimes is a misunderstanding of this issue. You’ll hear responses such as, “We’ve been doing that for years. We know how to manage retirement income. We’ve done that right along. What’s the big deal? This is not so complex.” And I find that to be, like I said, fascinating and frustrating and indicative of how much education of the financial advisory community still needs to be done. Do you buy into that?
Sollmann: Absolutely. There are a number of things that we feel very strongly on this issue. One of them is the need for a comprehensive approach to retirement income planning. In our view, reliability of income is all about making sure that people are thinking through what we would consider to be the four major components of a successful retirement plan: liquidity, longevity, healthcare, and wealth transfer. The mistake some consumers, as well as advisors, make is that they focus only on investments because they’ve grown up in an accumulation world.
Our very strong feeling – and this is shaping everything we do – is that it’s not about any one of those four things. It’s about how they work together and how the combination of those components allows consumers to make the most of what they have in retirement. This is going to be critical because most people won’t have enough and will need to stretch what assets they have to create security in retirement. And putting all of those puzzle pieces together can be complicated. Products aside, just the nature of the conversation that needs to occur around how you connect all of those important component parts is significant and a challenge for not only consumers but for many advisors as well.
Macchia: It makes perfect sense to me. I think it’s why I oftentimes feel that it’s a privilege to be able to be a participant in this facet of the industry where the implications of the work that’s being done are so profound for so many millions of people. So I completely understand what you’re saying, and agree with it.
Sollmann: By the way, that’s why we also believe that face-to-face education and advice is the key to helping people put this all together and take action. This is not for do-it-yourselfers. It’s too complicated. And so whether it’s about a MetLife representative or a third party advisor who distributes MetLife-manufactured insurance solutions, or someone providing education to employees at their place of work, we believe people need help, and it needs to be face-to-face.
Macchia: That leads to something that’s a favorite subject of mine. In the context of face-to-face as you describe it, I relate to that well. I began in the business as an advisor face-to-face with people across the kitchen table as they say, starting in 1977. And then for many years I progressed through the steps of sales manager, recruiter, trainer, eventually owner of an independent wholesaling firm with a large network of advisors spread across the U.S. That cumulative experience taught me how important the area of communications is. And I have an assertion that I make regularly and, as time goes on, while I always believed it, my certainty around it gets stronger. I’m interested in your take on it.
The assertion is that the organizations that are going to be the most successful in retirement income are not necessarily those that have the best “products,” but, rather, are those organizations that are the most effective in conveying their value to a large and fluid marketplace of consumers. The reason I say that is that I’ve observed over many years that all through the accumulation phase people purchased products, and invested in products, that they never truly understood. They maybe had a hazy understanding of them, at best. What they really did understand, though, was that they had trust and faith in their advisor. Now that we get to the retirement distribution phase, I think we come to an inflection point where the liability potential around- liability potential for all parties – is so great that another level of understanding is going to be required to achieve success. I mean not just in the advisor, but also in the underlying product or investment strategy itself. I wonder if that resonates with you as something that may be true.
Sollmann: You raise several key issues. Let me start with the importance of communication when it comes to retirement income, and by communication I am really talking both about education and how we communicate. I’m not going to suggest that during the accumulation phase the decisions that people need to make are easy, but they’re certainly a whole lot easier than during the distribution phase. In the distribution phase, there are so many misperceptions and knowledge gaps, whether it’s a question of: What are all of the issues that need to be considered in creating retirement income? What needs do specific products meet, and how can they work together? Are certain combinations better than stand-alone solutions? Educating consumers about these issues, using language that is simple and intuitive, is critical. We recognized this early on, and have had a number of efforts underway to educate consumers and at multiple levels, such as advertising, the web, direct mail, and of course through our affiliated advisors. We’ve also conducted extensive research to really understand what language motivates consumers to take action.
David, it’s also important to note that our focus on education extends beyond consumers to advisors. We see some of the same challenges in addressing misperceptions and knowledge gaps within the advisor community. For example, there’s a tremendous opportunity to help advisors understand the value of taking a comprehensive approach to retirement income planning – one that goes beyond investments. In taking a comprehensive approach that leverages the symbiotic relationship between insurance and investment solutions, advisors can better help their clients make the most of what they have and optimize Reliability of Income. Education can play a huge role here, but the key is being able to communicate in a compelling way – one that resonates with how advisors manage their practice.
Take an income annuity, for example – a payout annuity – and all of the misperceptions around what that product is and isn’t, and what it can and can’t do. We know for a fact that an income annuity is the most effective way to hedge away longevity risk. Through the power of mortality pooling and the availability of mortality credits, an income annuity does the double duty of not only creating a guaranteed stream income for life, dealing with the longevity risk, but it generates more income right away. We believe it should be an essential component of a retirement income plan. Yet, as you know, many consumers and advisors don’t get it and, today, very few use income annuities. But, if you actually spend some time with a consumer or advisor and educate them on income annuities, the light bulbs go off. We’ve seen this happen – it’s fascinating. When presented with the facts, both the pros and the cons, and the opportunity to create more income from the same level of assets, it’s hard for them not to see their value in maximizing retirement income.
Before we leave the topic of advisors, I do think it’s worth mentioning that trust will continue to be an important differentiator. Certainly in face-to-face, it’s all about trust. Do I trust the advice I’m getting? Do I trust the person that’s trying to help me here? That takes time. Again, turning assets into retirement income isn’t for do-it-yourselfers – it’s complex. It’s a bit like medicine. You’re never going to know enough as a patient, even though you might do a lot of homework. You’re never going to know as much as your doctor does. So trust is important. It’s the same with retirement income planning. Your advisor should be in a position to help you think through the decisions you need to make.
Macchia: Back to this issue of the inclusion of annuity income streams in a thoughtfully designed retirement framework. I agree with you. Coincidentally, I was asked earlier today to comment for a news story that’s being written about the relationship – the partnership – between Barclays Global Investors and MetLife.
Sollmann: What did you say?
Macchia: I’ll tell you exactly what I said. I said that on two levels it struck me as a course correction. In the first instance, a correction of a trend that went far too much away from defined benefit in favor of defined contribution. And I believe strongly that retiring participants who had been involved with DC plans would be much better off if they had a predictable guaranteed level of retirement income in some proportion to their overall retirement income, so on that one level it’s clearly very important to me.
On another level, it signals another course correction away from the thought that one industry is the answer to retirement security in favor of a new approach that involves multiple industries collaborating to create superior solutions for retirement security. So the partnership here between a large investment manager and an insurer like MetLife, for the purpose of creating hybrid offering just struck me as just the kind of thing that ought to happen more and more. In fact, it was several years ago that Francois Gadenne took the initial steps to form the Retirement Income Industry Association. That association was hatched on the notion that it would take a cross-silo, cross-industry perspective to solve this riddle of retirement income. So I presume you agree with this. I’m interested in how you see it.
Sollmann: It’s really quite simple. As I mentioned earlier, there is this very compelling symbiotic relationship between investments and insurance solutions. We feel strongly that the combination of investment approaches and insurance approaches is much more effective in generating and protecting retirement income than either approach alone. And so I do think you will increasingly find these connections being made, whether at the portfolio level or between manufacturing organizations. Again, it gets to the holistic perspective, and the value that’s created when components of a plan work together.
Macchia: I agree.
Sollmann: There are other insurance solutions that we believe need to be part of a comprehensive conversation, like long-term care. Not only do we feel long-term care insurance is an essential part of a holistic approach, its value is also best understood when considered within the context of an overall retirement income plan. The fastest growing channel for long-term care is the planner channel. When long-term care is sold on a standalone basis, people often say “It’s expensive and it’s complicated;” but when it’s sold in the context of a retirement income plan, people get it.
And the conversation – if it’s to be holistic – needs to go beyond long-term care to healthcare. If we’re going to be genuine about helping people put all the pieces together, you can’t leave healthcare out of the conversation. What we find all too frequently is that advisors don’t have that expertise. The focus needs to be not only on generating income, but protecting that income from risks and managing volatility. Long-term care, healthcare, annuities, and life insurance – in one shape or another – all need to be a part of a comprehensive discussion.
Macchia: I’d like to turn toward another issue that relates to all of this and that is the issue of competition and how it may be changing, and what challenges it may pose in the future. When you think about an insurance company in a generic sense, you say that the insurance company has the traditional competency and experience with underwriting, with longevitizing and with the ability to produce lifetime income streams. The insurance industry should arguably – logically – be the preeminent player as people’s priorities change toward the distribution of retirement income across a lifetime.
At the same time, you look at the industry and you say, “Well, there are issues here.” And you mentioned some of them earlier, but still the issue of transparency has not been solved. The issue of complexity has not been solved. We see that many advisors to this day will not engage with annuity products. We see, in certain facets of the annuity industry, all manner of sales practices problems and negative publicity, which unfortunately reflects on the entirety of the annuity industry. And so as I look at the opportunity for insurers in retirement, I say to myself, “I’m not absolutely certain that they will maximize their business potential here, unless and until there’s a look inward at some of the less than productive practices that go on and a willingness to change that.” How do you feel about that?
Sollmann: When we think about competition, it’s not just from other insurance companies, it’s across the financial services industry. It’s the banks, asset managers, broker dealers, and, frankly we partner with many of those organizations. What we bring to the table is the ability to mitigate risk and make guarantees. We’re seeing increasing recognition of the importance of guarantees. A number of these companies are exploring opportunities for building guarantees into their products. It’s recognition of that relationship between investment and insurance solutions I mentioned earlier. It presents a unique opportunity for us, and it’s reflected in our vision: MetLife inside every retirement income plan.
We also recognize that with all the competitive focus on retirement, activities relating to seniors will continue to get increasing regulatory attention. We focus intensely on compliance — making sure people get a product that’s suitable for them, making sure they understand what they bought, and making sure we’re using the right language. We are removing jargon where we can, where we’ve got the flexibility to do that from a regulatory perspective. We see a tremendous opportunity to lead the marketplace here.
Macchia: It reminds me of an instance not long ago. I was speaking at a conference, and the subject was post-retirement income distribution solutions. On the panel with me was an individual who works for a very large investment management company that’s a huge provider in the 401K space, and his assertion was that a target-date mutual fund is a perfectly good solution for someone’s post-retirement income needs.
Sollmann: That’s a little frightening.
Macchia: You can imagine we had sort of a heated debate. But to the extent that some organizations that perhaps don’t agree on the importance of guarantees have a lot of marketing and advertising muscle, it just creates an even bigger education and communications challenge for people who take a different approach.
Sollmann: You mentioned earlier there are a lot of advisors that don’t like to sell annuities. Why is that? It’s partly because certain advisors get good at one thing and that’s just the way they want to manage their practice. But some of it is also due to a lack of understanding. It reinforces the importance of education and communications. We need to do more of it, and as we do, we think advisors will increasingly see what academics and economists have long known: the value of using insurance solutions – guarantees – to hedge away longevity risk in their clients’ investment portfolios. I think you said earlier that products will be less important than communication. I wouldn’t go so far as to say they will be less important. I think innovation will continue to be critical for manufacturers of risk management solutions, and those innovations will be focused on overcoming some of the purchase barriers that we see today.
Macchia: I agree with that. I guess I feel that communications is critical because as good as the innovation of the product may be, if the client won’t open up to it because the communications were inferior, it won’t do any good. Let’s accept it. You’re correct about that. I observe from a distance that MetLife is a company that is staking a claim to leadership in that particular area of protecting against longevity risk. Is that true? And if it is true, what is the company doing in terms of its product design innovation to meet that goal?
Sollmann: Let me talk about innovation at MetLife broadly. Yes, helping individuals mitigate longevity risk is an area getting a lot of our attention. For example, we were a pioneer in bringing longevity insurance to the marketplace. We were the first company to introduce income annuities as an allocation option within 401(K) plans. But, we’re innovating in other ways. Let me give you a great example. As you probably know, we have a very significant face-to-face distribution franchise. We also have a very large institutional business with significant “relational capital”, by that I mean the seat at the table we are privileged to have with a broad array of institutional customers. We are leveraging these two unique assets to provide education and advice at the workplace through a program called RetireWise. RetireWise is focused on helping employers provide comprehensive retirement education to their employees that goes beyond what is typically provided, namely investment advice. It’s being well-received. We educate employees through a four-part seminar and then give them the opportunity for a complimentary, face-to-face consultation. We’re finding that there’s a real need for and interest in doing that. Our ability to deploy affiliated advisors at the workplace is, we believe, unmatched in the marketplace. We’re also very focused on asset gathering. You might think of that as the annuity business, and it is, but we also have a rapidly growing wealth management business and, of course, the MetLife Bank. We recognize that consumers today still largely think about retirement in terms of their bag of cash. So, having strong asset gathering capabilities is critical for establishing relationships with consumers that enable a broader conversation about the value of risk management solutions as an integral component of a retirement income plan.
Relative to the MetLife Bank, we have entered the reverse mortgage business because we think that, increasingly, reverse mortgages are going to be a smart thing for consumers to do – and not just for people who see it as a last resort. Through the MetLife Bank we launched our reverse mortgage business a year ago and recently upped the ante by acquiring EverBank’s reverse mortgage business. Reverse mortgage products will be another way to help individuals make the most of what they have.
Supporting all that we do is our focus on thought leadership. We want to be seen as a smart and value-added provider of retirement solutions. Are you familiar with our Mature Market Institute?
Macchia: I’ve heard of it but I honestly don’t know much about it.
Sollmann: MetLife’s Mature Market Institute is a leader in providing research and reporting on issues affecting adults age 50+. They just celebrated their 11th anniversary. Last year the Mature Market Institute had 958 million media impressions through a couple thousand publications. They’re a very powerful source of intelligence for MetLife. It helps us understand how best to have a conversation with consumers that starts with how they envision the second half of their life and all the issues that surround aging and retirement — beyond products – that need to be an integral part of a retirement income conversation.
We recently released a survey called “The Retirement Income I.Q.” One remarkable finding from the survey brings us back to the ability of income annuities to create more income. When we asked the question, “What percentage of your assets do you think you can safely withdraw each year?” nearly 70 percent of people said that they can take out more than four percent, the rate most experts recommend. But, an alarming 43 percent said they could take out 10 percent or more. With research like the Retirement Income IQ, we are helping people understand the reality of what they’re going to be able to do in retirement, and then giving them the tools, like an income annuity, to leverage their retirement assets. So thought leadership is another very important area of investment for us.
Macchia: It’s certainly a very comprehensive and holistic undertaking that you’re leading. I admire it greatly. I’d like to transition to a few personal questions if I could. I’m sure people would be interested to know about your background. From your childhood where did you grow up? Where did you go to school? How did you get to the high position that you have today?
Sollmann: I walked five miles to school every day. It was tough. Just kidding! Let’s see. I grew up in New Jersey and Connecticut. My wife, two daughters, and I live in Connecticut now. I graduated from Bates College with a degree in economics. After graduation, I looked at opportunities within financial services. I had worked on Wall Street a couple of summers as an intern so I considered investment banking, commercial banking, and insurance and was intrigued by an opportunity to join MetLife as a sales trainee in the National Accounts division of our group insurance department. We’re a leader there. I was given the opportunity to fast track the career development process in account management. And, so, cut my teeth working closely with our largest and most cutting-edge customers. Later on in my career I ran our National Accounts division, and then in the late 90s ran substantially all of our group insurance operations.
One of the highlights of my career was being a member of our road show team when we went public. The opportunity to talk about MetLife to potential investors in our IPO from around the world was very exciting.
In 2001 I was asked by our then CEO Bob Benmosche to do something completely different. Bob was very much focused on moving the senior leadership team at MetLife into less familiar areas to give them a broader MetLife perspective, and I was asked to take on the responsibility for our Mergers and Acquisitions department, which was great. I learned a tremendous amount about the financial services industry beyond insurance. My role there culminated with our $12 billion acquisition of Travelers Life & Annuity in 2005. I was the catalyst behind our acquisition of Travelers and managed the deal team and the integration.
How did I then come to lead the Retirement Strategies Group? In our Institutional Business, I reported to Rob Henrikson. When he became CEO, he asked me whether I was interested in helping him fulfill his goals and dreams around the retirement opportunity. That led to the creation of the Retirement Strategies Group at the end of 2005.
Macchia: I take it that you love what you’re doing.
Sollmann: It’s exciting. It’s fun. We have this enormous opportunity to tell a story that not enough people have heard. It’s such a compelling story – - helping people see the value of MetLife inside their retirement income plan. And, I don’t think there’s a clear winner yet. No one has nailed this yet. Things are changing very rapidly and so there’s a lot of room here for somebody to emerge as a very significant leader. We think that we are well positioned to do that.
Macchia: Let me ask you to imagine something. I hand you a magic wand, and by waving this magic wand you can instantly affect any two changes at all that you could imagine, particularly in the world of financial services, any two changes at all, what would those changes be?
Sollmann: From our perspective, there are two obstacles that need to be overcome. First,getting people to plan for their retirement. And I don’t mean plan in a fee-based financial planning sense, although that would obviously be part of it. People just need to begin taking some steps to understand the issues and prepare themselves for retirement. That’s one. The second would be for people to see that risk management solutions need to be an integral part of their retirement income plan, that it is not just about their bag of cash, and that investment approaches are not sufficient to create a secure retirement income plan.
Macchia: Good answer. If you were not heading up this strategically important unit, but instead could be anything else – any other occupation in any other industry – what would you be?
Sollmann: That’s a good question. I don’t get asked that one very often.
Sollmann: Let’s see. A photographer for National Geographic. I don’t know.
Macchia: Mine would be to be a great trumpet player. Regrettably I have no skill in that area. Last question: If you were to imagine your own retirement in its most perfect, idealized form, where will you be and what will you be doing?
Sollmann: I will continue to live in the Northeast. I just need those seasons. I love the fall. I think it’s the romantic in me: fires and sweaters. And my family and I love to ski, so I need the winter. I also need to be near the ocean. It’s calming. We enjoy spending time in Nantucket. And I’ll probably be doing something. I can’t see myself slowing down. I need to be busy. I like being creative. And, as the proud father of 17 and 8 year-old daughters, it’s unlikely slowing down will ever be an option.
Macchia: As someone with 8 year-old twins, I know what you feel.
Sollmann: Yeah, right.
Macchia: Okay, well, this has been terrific. Before we conclude let me ask you, are there any areas I have missed that you’d like to make certain are brought out in this conversation?
Sollmann: I don’t think so. I think we’ve covered a lot of ground. I really can’t think of anything. Let me ask you a question. Did you hear anything that surprised you?
Macchia: Yes, and don’t take my answer personally because I knew you were a very savvy executive and were very well-informed and had a varied experience, but you’ve clearly got this retirement thing down. You’ve got it nailed, in my opinion. You’ve really got the spectrum of understanding and perceptions that constitute leadership in this area. And so I guess I expected to be impressed, and I was even more impressed than I expected. Take that as a compliment.
Sollmann: Thanks, and that’s why I think we’re so well-positioned here, David. I think we do understand certain dynamics. It’s not to say it’s going to be easy, but we’ve made a big commitment across our company to this effort and we have the balance sheet to make it happen.
Macchia: Yeah. I love the passion. The commitment and passion are palpable, and I think when there’s so many people to be educated and motivated and enlightened, it’s going to take all of that and more to make it successful.
Sollmann: I agree.
Macchia: So thank you so much.
Sollmann: Thank you, David.