Thank You, Survey Says, Michael Finke Says, Risk is the Fabric of the Financial Universe, Constance Keeps Getting Better…and So Does RetireOne

Thank You for Choosing RetireOne

In the second quarter of 2022 these advisors began working with us: Brian Low, Brent Wilsey, Karen Vergara, Ann Areco, Ashli Newcomb, Joe Froemming, Matt Jonathan Savela, Amanda Salyer, Nicholas Stebner, Chad Ernzen, Timothy Stasinoulias, Jerry Matecun, Mindy Tankel, Bradford Johnson, Andrew Hunt, Brian Cheatham, John Borger, and Neil Blicher.

Thank you for choosing RetireOne and welcome to the platform!

We just wrapped up our annual RIA PARI survey (more to come later this month) and it confirms a lot of what consumer research tells us. RIAs say their clients are worried about a variety of things that could have an adverse impact on their retirement. The list is long. Inflation is skyrocketing, 401(k) balances are dropping like lead balloons, and yes, rates are going up, and fixed income is in a bad spot, but for Americans wondering: what do I do right now? Those rate hikes are making annuities more attractive. In fact, guaranteed interest on 5-year MYGAs have risen as high as 4.6%.

Survey Says: Retirement is Confusing

As pensions continue to disappear, the burden of figuring out how to fund increasingly long retirements has been placed on retirees themselves. Economists and actuaries will probably be able to solve it for themselves. The average American? Not so much.

According to a recent survey from the Principal Financial Group, 50% of workers either don’t know how much they should be saving for retirement, or know they’re not setting aside enough. Most don’t think Social Security will be available to them when it comes time to retire, and a full 73% (!) of respondents said they lack knowledge of how to turn their retirement savings into income.

Workers are worried, and for good reason. Creating a steady stream of income in retirement can be confusing, and this is exacerbated by current market woes.

Survey Says: Financial Planning is Most Valuable Advice

It would logically follow, then, that another survey by Natixis Investment Managers finds workers, especially millennials, consider financial planning to be the most valuable professional advice on offer. As retirement decisions continue to confound Americans and the market remains less stable, the value of a solid financial plan is hard to overstate. But I’ll take the liberty: it’s super-duper massive.

There’s a lot of responsibility associated with that value: the responsibility to ensure that clients can continue to enjoy the lifestyle they establish before they retire, and that they’ll have enough money to last. With rates on the rise and lingering volatility, trusting in the market and traditional decumulation strategies could be a risky proposition…Especially for folks retiring right now or in the next few years.

What financial planner wants to say to her client, “Hey James, I know you planned to draw $40,000 a year from your retirement assets…But, uh, the markets dropped 20%, and now that $40,000 looks more like $32,000. Sorry, bud.”

Michael Finke Says

One of the many reasons we worked with Midland National to develop the Constance contingent deferred annuity (“CDA”) was to address some of this confusion and uncertainty around retirement. With it, we aim to help simplify these decumulation decisions for Americans and give their financial advisors more control. As retirement horizons lengthen, having longevity protections and safeguarding against sequence-of-returns risk become increasingly important.

In April, we partnered with Dr. Michael Finke of the American College on the release of a white paper that analyzes the benefits of the particular form of portfolio income insurance afforded by Constance. The paper, “Portfolio Income Insurance – Understanding the Benefits of a Contingent Deferred Annuity,” concludes that wrapping a portfolio with insurance in the form of a CDA may offer better upside potential than a portfolio of bonds or traditional income annuities.

Dr. Finke’s white paper has since been featured and/or mentioned in articles on ThinkAdvisor, Life Annuity Specialist, Wink, and 401k Specialist Magazine. Here’s an excerpt from the 401k Specialist Magazine’s coverage:

“It is possible for an institution to guarantee that a retiree will always be able to spend a fixed amount in retirement no matter what happens in financial markets,” writes Dr. Finke, who serves as Professor of Wealth Management at The American College. “Portfolio insurance through a CDA provides the freedom to spend within one’s financial planning boundaries, without the fear of running out of money due to events out of one’s control.”

And that’s the point: we can only control what we can control. Portfolio income insurance has come along at just the right time to help do just that. Interest is bubbling up. in early April, Bob Heubscher interviewed RetireOne President Ed Mercier and Dimensional’s Tim Kohn about Constance for his Advisor Perspectives podcast “Gaining Perspective.” As Bob points out in the liner notes, “Those at or near retirement don’t have time on their side.” Indeed.

And in late May, Dr. Finke and I were both interviewed for a MarketWatch article about the potential benefits of a CDA.

Risk is the Fabric of the Financial Universe

So just what is the risk that a retiree may outlast their savings in a given market? Or that poor market returns early in retirement will have a negative impact on spending and lifestyle? How can portfolio income insurance help? We partnered with Rick Bookstaber’s firm, Fabric, to build a tool that seeks to answer those questions.

In a video interview posted to the Fabric website, Rick says, “Risk is the fabric of the financial universe.” I love that quote. Sometimes risk is framed in an adversarial light. But what would be the shape of reward in the absence of risk? The tool Fabric have developed actually seeks a bigger question: “What if, instead of avoiding the risk, one could wrap it?”

Rick, Fabric Co-Founder/CEO Govinda Quish, and I joined David Macchia for an Advisor Perspectives webinar in June to talk about various risks to retirement portfolios, how to wrap it, and what this new tool tells us about it. Check it out.

Constance Keeps Getting Better

In May we announced the addition of 255 new funds and models to our CDA. With the inclusion of funds from Cambria, Fidelity, Schwab, and more, Constance can now wrap 390 approved ETFs and mutual funds. And, because we weren’t content to stop there, we also reduced Constance’s certificate fees!

We also created a Portfolio Builder tool to help RIAs put together portfolios of covered funds and choose the asset allocation tier that’s right for their clients. And, as mentioned above, we teamed up with Fabric to provide a free version of their risk management tool, which aims to help advisors better understand how Constance may impact the long-term health of a client’s retirement spending.

View On-Demand Webinars from Q2

  1. CE Webinar: Navigating Uncharted Waters for Retirement Income Planning
    In this session, Wade Pfau, PhD joined us to explore sustainable retirement spending from investments in light of recent market conditions. He discussed strategies to support more spending by integrating both investments and income protections, such as a portfolio income insurance.
  2. CE Webinar: Controllable vs. Uncontrollable – Navigating Risks to a Retirement Spending Pla
    Greg Going of Allianz Life Insurance Company of North America (Allianz) joined RetireOne’s Mark Forman to explain how to help clients better handle the uncontrollable risks they’ll face in retirement.
  3. Measuring and Mitigating Risks to Retirement Spending
    In May, FABRIC co-founder Rick Bookstaber, FABRIC CEO Govinda Quish, and I joined David Macchia for this Advisor Perspectives webinar to discuss the risks retirees and their advisors face as they create retirement spending plans. We discussed the risk cycle and explored how risk can be ‘wrapped’ with portfolio income insurance’ to provide reliable income streams.
  4. CE Webinar: Creating a Goals-Based Retirement Income Plan with Michael Finke, PhD
    Michael Finke, PhD, and Lauren Drapeau of Protective joined Mark Forman to explain what should be considered when transitioning from a portfolio-based to goals-based retirement income plan.

RetireOne Keeps Growing

Last quarter, we bolstered our leadership team. This quarter, we made some important hires to fill out other parts of the company as we continue to grow.

On the Advisor Solutions side, we’ve added Jeff Rancourt to the team. Jeff has a long history of helping advisors find the right insurance solutions for their clients, and we’re excited to have him with us. But he’s hardly the last person we’ll add to that team and, as our Advisor Solutions team expands, having an effective process for onboarding and training new hires becomes increasingly important. To that end, we’ve brought Chad Cremieux on as Sr. Manager, Education & Onboarding.

A bigger Advisor Solutions team means we’ll need a larger Support team to help them succeed. That’s where Anna Engard, our new Advisory Service and Operations Associate, comes in.

And finally, we’ve hired Joy Hemstreet as our Staff Accountant; she’ll be working directly with our CFO, Karen Chang, to ensure our financials are in order.

Welcome to the team, everyone!

As always, if you like this content, be sure to follow RetireOne on LinkedIn, and Twitter for more.

Best Wishes,

Stone Signature

David Stone
Founder and CEO