Author Archives: Anthony Nygren

Annuity Warming and Convenient Truths

Annuities solve two major household financial challenges: asset preservation and income in retirement.  And they often solve the problem at a lower cost to the consumer than capital market alternatives.  Consumers and advisors want a solution to these problems; most, however, reject annuities as a component of the solution.

Have we arrived, at last, at a tipping point?  Here’s more evidence that we may have:

An article in Barrons today is entitled “Special Report – Retirenment: With their steady income payments, annuities are suddenly hot.  Hot?  Hot?  Annuities?

http://online.barrons.com/article/SB50001424053111904472004576392401608661120.html?mod=BOL_twm_ls#articleTabs_panel_article%3D1

This follows another positive article in the New York Times two weeks ago about the unique benefits of annuities. http://www.nytimes.com/2011/06/05/business/economy/05view.html

A tipping point?  Are annuities now “in”?  As consumers read more and more positive press about annuities, advisors will find the annuity recommendation more appreciated than in the past.    Annuity manufacturers need to take full advantage of this thawing.

This annuity warming is a very convenient truth for the annuity industry!  Marketers and sales professionals must prepare to win their share now!

The Retirement Income Conundrum

A day doesn’t seem to pass without a new, alarming headline about retirement in America.  I was reminded of this today when our head of research sent me this link about the decline in the “Retirement Optimism” index (perhaps an oxymoron these days)  https://www.wellsfargo.com/press/2011/20110602_Retirement.  And consistent with other research, retirees maintain a consistently higher level of optimism than non-retirees.

Despite this morose pre-retiree outlook about retirement, the study reports that about 3 in 4 have no formal plan for retirement.  Why are households unable to address such an important personal challenge and prepare for the days of retirement?  Well, there are many reasons for this, including:

1) The definition of retirement.  What’s retirement?  Has the norm ever been 15-20 years of golf, world travel, and endless vacations on a private yacht in the Aegean?  Maybe “retirement” is a more transitional period of life, when earned income declines, new expenses emerge (e.g. health), and guaranteed sources of income from accumulated financial assets are required to match consumption  liabilities.  So maybe “planning for retirement” is not exactly the caracature we all imagine.

2) Savings.  As we near completion of the transition from a defined benefit to a defined contribution work place, have households accepted responsibility for postponing consumption and saving for a time when they’ll need new sources of income?  This will require a cultural change in how households budget.

3) Investing.  How many consumers know how to build a retirement portfolio?  How many understand the benefits of an annuity and how to select the most appropriate product?  How many understand how to use capital market products to create a stream of guaranteed income?  The accumulation model alone based on risk and return just doesn’t solve the retirement problem yet the airwaves are filled with messaging that encourages this.

4) Advice.  Despite the dramatic increase in advisor clients requiring retirement income portfolios, there is still no acknowledged consensus on the best approach.  Moreover, compensation models based on AUM often conflict with what’s best for the client.  Systematic Withdrawal Plans, Annuities, Time Segmented Allocation Models, laddering with strips….or plain old risk and return…where’s the consensus and why isn’t there one?

5) Insurance.  To some degree, most consumers need income “insurance” in retirement.  Typically, insurance products are sold, not purchased.  Given this paradigm, the financial advisor is key – he/she needs to recommend the right product for the right purpose.    This brings us back to the point 4 – advice.  The financial intermediary is going to be key in helping households efficiently use their savings to create income for retirement.  Manufacturers of retirement income products are going have to educate financial advisors on the benefits of their product from an outcome point of view and when the advisor should incorporate them into their client portfolios and financial plans.

Tablet Computers’ Killer App?

Anyone who works in sales enablement needs to take notice of how rapidly tablet computers are sweeping across the corporate landscape. According to recently published research from Model Metrics, 68% of companies plan to have tablets deployed in the field by 2012. Over 40% have deployed or plan on deploying them by the end of 2011. And almost 50% of those deployments, according to the study, involve sales force automation applications.

As we have blogged previously, the rapid and widespread adoption of tablets represents a huge opportunity for organizations that are willing to make an investment in sales enablement. Even further, deploying tablets to the field in the absence of high-quality sales tools designed for the tablet platform is a waste of the technology investment. In many ways, sales tools—such as automated proposal builders, presentation templates, and product comparisons—should be a “killer app” for the tablet in B2B selling because they represent a perfect alignment of technology benefits with user requirements. For sales tools to be effective, they must be easy to use, intuitively interactive, and fast: all of these characteristics are part of the raison d’etre of the tablet device. Moreover, though, tablets enable sales tools to go a step beyond the status quo because, if done well, they can facilitate customer participation. Compared to handing a prospect a feature-based product comparison sheet, how much more effective would it be to hand prospects a tablet loaded with a diagnostic app that walks them through a series of questions about features, benefits, and value that highlight key points of differentiation for your product versus the competitions’?

Perhaps the most important component of the tablet opportunity in the sales force is that tablets can provide significant support to the majority of sales people in the vast middle of the bell curve—not the stars but those who have some skills and the best of intentions. If the greater structure, consistency, and interactivity enabled by the tablets can raise the average performance of this group just a few percentage points, it can represent millions of dollars in revenue gains.