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Retirement Planning > Retirement Investing

As Retirement Income Symposium Ends, Speech on Benchmarking Gets Advisors Buzzing

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If none of the other indexes and benchmarks works for you, create your own. Charlie Farrell did. His Farrell-Northstar Retirement Income (FNRI) Index tracks dividend-producing companies to ensure an adequate stream of income for his clients. He explained its importance and how it works in the closing session Tuesday of the Retirement Income Symposium in Chicago.

In addition to being an advisor with Northstar Investment Advisors in Denver, Colo., Farrell is author of the book Your Money Ratios: 8 Simple Tools for Financial Security, called “one of the best financial books to cross our desks this year” by the Wall Street Journal.

Comments from attendees both during and after the session revealed a broad cross-section of opinions on the topic; some strongly agreed with what he said, others thought it could be done with existing benchmarks and still others said it was something they didn’t understand.

Other conference speakers included author Susan Hirshman on the topic of women and investing; Pershing’s Mark Tibergien on practice management;  Envestnet PMC’sMichael Henkel on meeting retirement planning investing needs; and T. Rowe Price portfolio manager Wyatt Lee offered a spirited argument in favor of target-date funds.  

Summit Business Media’s group editor in chief Jamie Green also moderated a panel discussion Monday afternoon that examined how advisors are serving the retirement income needs of their clients: what works, what doesn’t, and what products and services they need to do a better job. 

Conference organizers claimed a 29% increase in the number of attendees over 2009’s conference.

“Different objectives require different benchmarks,” Farrell said during his session. “You wouldn’t compare a large cap value manager against a small cap growth benchmark. Similarly, you can’t compare retirement income objectives to a totally different set of objectives. Something more accurate must be created and used.”

Retirement income management objectives, he said, must be meaningful (a 4% to 5% distribution), sustainable through all market cycles and inflation adjusted to maintain purchasing power.

“How do you design a benchmark for these objectives?” he asked. “Identify priorities, either current or stable income, growing income, principal stability, or capital gain. Then think about the benchmark allocations; 45% equity with 20% price decline parameters in severe bear markets (smaller equity allocation is sufficient in bull markets, smaller equity allocation is critical to surviving bear markets). And allocate 55% to fixed income.”

He then noted the index’s success. From June 30, 2008 to March 9, 2009FNRI Index decreased 16%, compared to the S&P 500’s 47% decline. From June 30, 2008 to June 30, 2010, the FNRI Index was flat vs.  the S&P 500 down 19%. From June 30, 2008 to Sept. 30, 2010, the FNRI Index had a total return of 15.82% (price: +6.56, income:  +9.26).

Next year’s conference is tentatively scheduled for fall 2011, though the location is yet to be determined.


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