Retirement Income: The Final Frontier

With over $16 trillion at stake, there's little doubt that the next great tidal wave of personal financial activity will consist of retirement income for the baby boomers.

What is still hazy is how exactly financial advisors and financial products will serve that activity. Writing for MutualFundWire.com, Sean Hanna reports from last week's ICI conference by offering an assessment of how the mutual fund industry might prevent itself from being left out in the cold...

No one knows how the nascent retirement income industry will play out, no one knows what kind of products will be gain wide appeal and no one knows the role of mutual funds in generating retirement income. [...]

The MassMutual product entry allows investors to allocate their portfolio between an immediate annuity and mutual funds. They are even allowed to reallocate assets back to the funds. Johnson says that while the product only offers mutual funds from MassMutual affiliate OppenheimerFunds today, he expects that a open-platform version of the product will debut down the road.

If retirement income does take off, products like the MassMutual one may be one of the few ways mutual funds can hang on to their assets. As [senior vice president] Tom Johnson explains, products like MassMutual's may be one way for mutual funds to hang on to their customers, and those customers' assets.

Fascinating stuff — and a wake-up call too.

Retirement & Healthcare: Convergence or Disturbance for Financial Advisors

In today’s Wall Street Journal, (5/14) a short article on page C6 entitled Advisers To See Their Roles Shift crystallized a point that has been bothering me for some time. Whose job is it to take care of our future? Should we embrace our independence and become financial and healthcare experts, equally comfortable with Wealth Accumulation and Asset Allocation as well as Managed Care, Wellness and Disease Management?

As someone who has championed financial literacy for two decades, it becomes increasingly apparent that most people will not do it for themselves and will need “professional help”. In the retirement business, we have learned to use people’s inertia against them by introducing auto-enrollment and auto-deferral increase programs. Once enrolled in these plans many people will not make the effort to opt out and ultimately, that behavior may help create some retirement benefits down the road. Must we do the same for healthcare?

And, where will the champions of this effort come from? Will there be a new hybrid financial/healthcare advisor who will take a holistic approach to an individual’s needs? Who will be the first to step up to the plate and redefine the industry? Surely the answers begin with those far-sighted individuals and organizations like the Investment Company Institute who have a platform to begin the discussion. Plaudits to the ICI – now who else wants a turn at bat?