Thank You, Constance Launch, New Research from Wade Pfau, Risks for Retirees, 10-Year Anniversary, New MYGAs, New RILAs, and Welcome to the Team!
When I was chief legal counsel, and Scott Strait was chief technology officer at Schwab back in the aughts, we had an idea: we wanted to challenge the status quo of retirement investing. Along with co-founder Jay Miller, we started what was then known as Aria Retirement Solutions in November of 2011 and launched our first contingent deferred annuity with Transamerica. Little did we know that the twenty teens would usher in, among other things, a very active period—thanks in part to the now-vacated DOL fiduciary rule—in the development and innovation of advisory annuities. It was also the early stage of the longest bull market in our nation’s history. Both changed our tactics, but never altered our vision for helping advisors address retirement security. And ten years in, we’ve come full circle. This fall we launched our latest innovation with our partners at Midland National: Constance.
Thank You for Choosing RetireOne
In the fourth quarter of 2021 these advisors began working with us: Michael Puckett, Tim Neuenschwander, Jacob Mercer, Kristopher Mink, Michael Miller, Andrew Haas, Greg Watts, David McLaughlin, Paul Raab, Scott Butera, Brendan Moody, Scott Worley, Stephen Hetrick, Ben Hicks, and Joe Schmitz Jr.
Thank you for choosing RetireOne and welcome to the platform!
New Research from Wade Pfau
To support the release of this Portfolio Retirement Income Guarantee called Constance, we collaborated with American College of Financial Services Professor Wade Pfau, Ph.D. on a new white paper. Dr. Pfau’s “Unbundling Investments from Insurance to Solve for Lifetime Sequence-of-Return Risk,” explores the unique problem presented by sequence-of-returns risk on a retiree’s “fragile decade” and examines how a Portfolio Retirement Income Guarantee like Constance (also known as a Contingent Deferred Annuity or “CDA”) may help solve it.
The confluence of a few significant financial factors currently makes building durable, sustainable income streams difficult for retirees: high equity valuations, due to the unprecedented bull market; low bond yields; and sequence of returns risk. With the aforementioned portfolio retirement income guarantee, Wade sees an opportunity.
Because the insurance protections are unbundled from the underlying investments, advisors and their clients may insure this fragile decade by covering approved institutional ETF’s and mutual funds in their IRAs, Roth IRAs, or taxable brokerage accounts.
In a webinar with Advisor Perspectives in early October Wade compared it to “having a put in the stock market” that, once safely through the fragile decade, an individual investor could cancel if no longer needed. Maybe having a CDA is like having your cake and eating it too, er, rather, as Michael Finke pointed out in an interview the Morningstar’s Christine Benz, maybe it’s like ensuring that you’ll have enough cake by insuring the cake itself.
According to Dr. Pfau, retirees can “manage sequence risk by pooling their market risk and longevity risk through a contingent deferred annuity that provides the traditional risk pooling benefits of an annuity with a much smaller ‘annuity footprint,’ helping to overcome many of the traditional obstacles to annuity use.”
So rather than avoiding the risk, the question is: why not wrap the risk and take advantage of the risk premium the market offers?
Innovations like Constance are pushing insurance protections into a new phase of innovation that will be critical for American savers as more folks retire without the certainty provided by pensions. Now that we’re standing on the doorstep of “peak 65,” a great flood of retirees will need to pensionize their 401(k)s, IRAs, Roth IRAs, and other retirement savings to bolster their spending power in retirement without the prospect of outliving it.
A Hidden Risk for Retirees
This protracted bull market has had obvious positive impacts for individual investors’ retirement savings and driven equities prices to historical highs (the P/E10 ratio of the S&P Composite = 38.2 as of 1/5). Typically, that may not mean as much as it does today, but thanks in part to long-lived and super accommodative monetary policy, American savers have been forced to seek alternatives for de-risking client portfolios, and many have simply opted to up the ante. All this intervention and economic stimulus has certainly worked, but has investor success inspired some complacency?
Ron Surz thinks so. The GlidePath Wealth Management CEO is really concerned about how much risk retirees appear to be taking on in portfolios. He thinks there’s never been a worse time to retire. Among other things, Ron is concerned that interest rates are so low that advisors are pursuing more equity risk without the benefit of an allocation to bonds to protect against market risk.
Our own research corroborates this fact. Of the RIAs we surveyed this past spring, 27 percent indicated that, for under-saved clients, the recommendation is to take on more equity risk.
Again, retirees in their “fragile decade” are particularly vulnerable to market risk. They don’t have the time to make up for portfolio losses which can be compounded as they draw down their retirement savings.
Surz thinks that many investors may not even realize the amount of risk they already bear—some of it is hidden in the target date funds in 401(k)s where many retirement dollars land by default. And those TDF dollars are compounding…
New market conditions demand powerful new solutions like unbundled Portfolio Retirement Income Guarantees.
A ten-year bull market can wipe out many of the bad memories, right? But the seeds for our business plan were sown in the late aughts—during one of the worst market declines in history—and we’ll never forget that exciting and uncertain time.
The Great Recession humbled a lot of people and inspired us to work for the kind of change that we think is necessary to help more Americans retire without the prospect of being devastated by a black swan event and diminishing their spending power in retirement. Folks shouldn’t have to face that. Without the certainty of pensions, they may.
Economist Allison Schrager elucidates the problem with old school retirement income frameworks which assume that the objective of spending in retirement is simply not running out of money. She says, “Actually, the objective is… well, spending—and having some predictability around one’s income. Not running out of money is the constraint, not the objective.” I agree. And absent pensions, protected income solutions appear to be one of our best bets.
November of this past year marked the 10-year anniversary of RetireOne. We now serve more than 1,000 RIAs managing over $1.5B of assets on our platform for 8,000+ clients. Congratulations to the team for persevering, and we look forward to serving our RIA Firm Partners with the same top-notch service they’ve come to expect since 2011.
In Q4 our partners at Allianz Life and Jackson launched new commission-free Registered Index Linked Annuities (“RILAs”). Also known as “Buffer Annuities,” “Index Linked Annuities” (“ILAs”) or “Structured Annuities,” RILAs are registered products designed to provide defined outcomes via buffer and/or floor protections.
Here are the details:
- The Allianz Index Advantage Income ADVSM offers single and multi-year term strategies, charges no surrender fee, and includes an onboard living withdrawal benefit.
- The Jackson Market Link ProSM Advisory offers both floor and buffer protections with no surrender charges, and zero product fees.
With the addition of the new American Life fee-based MYGA, Midland National’s Oak ADVantage MYGA, and Great American’s Advantage 5 MYGA in Q4, we expanded the RetireOne fiduciary marketplace to include our first commission-free advisory Multi-Year Guaranteed Annuities (MYGAs).
- The American Life MYGA, American Classic, is available for both qualified and non-qualified plan types and includes the option of a 3- or 5-year guarantee.
- Midland National’s Oak ADVantage MYGA is available in 3-, 5-, or 7-year durations with a flat, 3% surrender charge schedule in each year of the chosen duration.
- Great American’s Advantage 5 Advisory MYGA has an initial five-year term and may offer the option to renew for one year or a new multi-year term.
View On-Demand Webinars from Q4
- Webinar: Best Practices for Retirement Income Planning + How a New Tool can Help
In this presentation Wade Pfau, Ph.D. looks at sustainable retirement spending from investments in light of recent market events and discusses strategies to support more spending by integrating both investments and income protections, such as a new Portfolio Retirement Income Guarantee that unbundles the insurance from underlying investments to build more efficient retirement strategies. Wade is joined by me, and host Bob Veres.
- Webinar: First Look – Ground-Breaking New Portfolio Retirement Income Guarantee
Kevin Hissong joins Mark Forman and me to lift the hood on our newest innovation: the Constance Contingent Deferred Annuity. This Portfolio Retirement Income Guarantee unbundles the insurance protections from underlying investments to allow advisors to create retirement income streams for clients by covering retail Mutual Funds and ETFs in IRAs, Roth RIAs, and taxable brokerage accounts.
- Webinar: Planning More Efficiently for Longevity with MoneyGuidePro
Experts from Allianz Life explain how to build, evaluate, and deliver plans for managing longevity risk with the MoneyGuidePro financial planning software.
- Webinar: Planning for Uncertainty with Advisory Annuities
Deepen your understanding to better educate clients and learn a fresh perspective on the flexibility that advisory annuities can provide to support distinct stages of retirement planning. Presented by our partners at Jackson National.
Welcome to the Team!
I’d like to welcome our newest additions to the RetireOne team: Brian Engard, Stéphane Goyer, Keegan Smith, and Amanda DeArmas.
Wordsmith Brian Engard made his bones designing, writing books about and marketing role playing games, as well as writing for university blogs, among other things. He’s now charged with various marketing/PR responsibilities at RetireOne including social media strategy and writing gobs of content about annuities and insurance. Thanks for rolling the die with us, Brian!
Administrative Assistant Keegan Smith joined our Service Team after graduating from Murray State University in May. Keegan likes to knock out lots of milestones all at once. Check it out: She graduated in May with a BS in Business Administration, got married two weeks later, adopted a good boy (Gordi the corgi) in August, and began her career in November. Welcome to the team, Keegan! And maybe slow down a little!?
Our Advisory Solutions Team also grew with the addition of Relationship Manager Amanda DeArmas. Amanda comes to us with a decade of experience researching investments and consulting with financial advisors on their insurance needs. A graduate of the University of South Florida, Amanda lives in St. Petersburg, Florida. Welcome to RetireOne, Amanda! And go Bulls!
And finally, we appointed Stéphane Goyer Sr. Managing Director of Product Strategy in November. A transplanted Canuck who raises Scottish Highland Cattle with his wife in his spare time ;-), Stéphane calls Bremen, Alabama home. He is also a former SVP and Head of Annuity Product Development at Protective, one of our incredible Platform Partners. We’re excited to have you on the leadership team, Stéphane!
Founder and CEO