Growth and Funerals in Retirement

In the early-2000s, the financial industry was slow to address the growth potential of the transition from accumulation to decumulation. Consensus naming conventions reflect this slowness of adaptation.

Accumulation is a consensus naming convention, so are the words: investment management, investment management professional, investment advisor, and asset allocation.

On the other hand, decumulation and distribution do not feel like consensus naming conventions because research shows that many retirees are net savers and the word “distribution” can be confused for what the sales channels do.

Use those two words and you are more likely to start a debate rather than to communicate a reliable point.

RIIA was started in 2006 so that members could work inside their company and externally on RIIA Committees to understand what can and what must be named and done differently in decumulation because of:

- Changing investors needs as they approach and enter retirement,
– Resulting and fundamental changes in business model for retirement income,
– Broader matching advisory processes and distribution strategies, and
– Reprioritized product features and development.

Indeed, during the mid-2000s, the industry created retirement income units in a variety of configurations including studies, project teams, task forces, staff units, matrixed units, product units in traditional P&Ls, new P&Ls, new business divisions, start-ups, etc.

Along the way, the words retirement income, retirement management and retirement professional became commonly used naming conventions. They are now understood reliably for what they mean.

However, some of these retirement income unit configurations proved to work better than others. RIIA documents this record of organizational successes and failures and reports the findings to the membership.

Since September 2008, ostensibly for budget reasons, many retirement income units have shut down or have been merged into a traditional product or sales channel P&L. It may be that “budgets” were a convenient explanation for a larger issue.

Kerry Pechter, publisher of the “Retirement Income Journal,” editor of the curriculum book for the Retirement Management Analyst (RMA) designation and a RIIA member, describes the larger issue as follows: Bringing together a diversification culture (Funds) with a risk pooling culture (annuities) to create an integrated product development/distribution effort has not worked very well.

From an evolutionary point of view, we know that fish can become birds given enough time. From a business point of view, forcing the pace of evolution by dropping the equivalent of fish and birds in the same unit is not likely to create successful hybrids.

At this point, many of us at RIIA believe that companies would have had more success treating retirement income units as process rather than product divisions. A process approach can create a more measured pace of business evolution.

The winning level of integration may be at the level of the advisory process rather than at the level of the hybrid product. For more details behind this thinking, take a look at RIIA’s Advisory Process and the curriculum for RIIA’s Retirement Management Analyst (RMA) designation.