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U.S. sales of fixed annuities were an estimated $19.5 billion in third quarter 2010, according to Beacon Research’s Fixed Annuity Premium Study. Sales were essentially flat quarter-to-quarter, with only a 0.3% increase, and were down 12% relative to third quarter 2009.

Estimated year-to-date sales of $55.4 billion were 35% below YTD 2009, which was the strongest three quarter period in the eight-year history of the Beacon study. The data excluded structured settlements and employer-sponsored retirement plans.

Credited rates fell during third quarter, with top rates on multi-year guarantee annuities dropping to 3.5% from 3.9%.  But the fixed annuity advantage over Treasury rates grew, and this helped MVA sales increase for the second consecutive quarter. The yield curve flattened, and fixed rate annuity sales by interest guarantee period shifted somewhat shorter as a result.

“Sales of fixed annuities were essentially flat quarter-to-quarter.  This is puzzling because, although rates declined in third quarter, the spread between 5-year fixed annuity and Treasury rates widened, and that usually stimulates an overall sales increase,” said Beacon Research president and CEO Jeremy Alexander.  “But the current interest rate environment poses a challenge for issuers of these annuities because it pressures profitability.  Until the interest rate environment changes, these profit pressures will motivate many issuers to limit sales.”  

“But MVA sales did grow 14% sequentially, so it seems that these annuities were the ones offering attractive rates.  Issuers may have chosen to emphasize MVA sales because market value adjustments help to insulate them from interest rate risk. Indexed annuity sales were up 4%, partly because owners could potentially earn more interest relative to fixed rates on annuities and certificates of deposit.  However, we believe indexed annuities did well mainly because of attractive lifetime income benefits, along with premium bonuses.”

Sales by category 

Indexed annuity sales hit a record-high 44% of fixed annuity sales in the quarter, (42% YTD) climbing to $8.6 billion, up 4% from the second quarter and up 17% from the third quarter of 2009. They Estimated results of the other product types were:

• Book value fixed annuities, which pay a declared rate for a specific period, $6.9 billion, down 5% from the prior quarter but down 31% from the same quarter of 2009.
• Immediate and deferred income fixed annuities, $2.3 billion, down five percent from the second quarter, up 17% year over year.
• Market value-adjusted  (MVA), which pay a declared rate but may adjust in value on early withdrawal, $1.8 billion, up 14% for the quarter and down 39% year over year.

On a year-to-date basis, indexed annuities also had Study-record sales and share of sales. Estimated YTD results by product type were: indexed, $23.4 billion; book value, $21.0 billion; fixed income, $6.5 billion; MVA, $4.5 billion. Income annuity sales improved 7% and indexed annuities were up 4% compared to YTD 2009. Book value sales fell 51%, and MVAs dropped 65%.  

Sales leaders by company

Allianz moved up a notch to become the quarter’s sales leader, replacing New York Life, which came in third.  Aviva advanced to second from third place.  American Equity moved up a notch to come in fourth.  Lincoln Financial Group rejoined the top five in fifth place.  Results for the top five Study participants were as follows:

Sales leaders by product

Third quarter results include sales of more than 500 products, a Beacon Study record. By product type, Allianz Life remained the leading issuer of indexed annuities. New York Life replaced Western National as book value sales leader and continued as the dominant income annuity company. Great American led in MVA sales, supplanting American National. Top sellers included:

Sales leaders by channel   

In the bank channel, New Directions was the new bestseller and the first indexed annuity to dominate bank sales in the Study’s history. Among independent producers, MasterDex X was again the leader. New York Life Lifetime Income Annuity was the top channel among captive agents and the New York Life Select Five Fixed Annuity led again among large/regional broker-dealers. In the wirehouses, Pacific Frontiers II (an MVA) replaced another Pacific Life product as the bestseller. Among independent broker-dealers, MassMutual’s RetireEase income annuity repeated as the favorite product.

© 2010 RIJ Publishing LLC. All rights reserved.

Indexed Annuities Set Sales Record 

Sales of indexed annuities reached $8.7 billion in the third quarter of 2010. That was up 16% from the same period last year and up nearly 5% from the previous quarter, according to AnnuitySpecs.com’s quarterly report, based on data from 40 carriers representing virtually the entire market.

“With CDs averaging 0.56% a year and fixed annuities hovering at 3.14%, I think we can count on another record quarter to close-out the year,” said the Sheryl  Moore, president of AnnuitySpecs.

Allianz Life maintained its leadership position with a 21% market share, followed by Aviva, American Equity, Lincoln National and ING, in that order.  Allianz Life’s MasterDex X was the top-selling indexed annuity for the sixth consecutive quarter. The average weighted commission paid to the indexed annuity agent reached an all-time low, 6.50%.

‘Chained CPI’ Will Punish Pensioners: RetireSafe

The ‘Deficit Commission’ draft report that was released last week quickly drew criticism from RetireSafe, a 400,000-member national advocacy group for older Americans.   

The draft report contained various approaches to reduce debt many directly affected seniors, two of the most onerous are; the chained Consumer Price Index (CPI) and changes to Medicare services.

“The ‘chained’ CPI will make the already flawed CPI used for the annual cost of living adjustment (COLA) even worse,” said Thair Phillips, president of RetireSafe. 

The Bureau of Labor Statistics first published the chained CPI in 2002 by the Bureau of Labor Statistics. It assumes consumers adapt to higher prices by switching to cheaper substitutes for their favorite items. For example, people shop at Costco if their usual supermarket raises prices, or buy chicken if the price of beef rises.

Advocates for older Americans say that seniors don’t have the same flexibility to change their purchasing habits or have as many options as younger people. They see the use of the chained CPI as an excuse to delay cost of living increases in entitlements. A skeptic might say it’s stingier.

The chained CPI rose from 100 at the beginning of 2000 to 126.4 in September 2010, representing an increase in prices of over 26% over almost 10 years. The more common CPI-Urban rose from 168.8 in January 2000 to 218.4 in September 2010, an increase in prices of 29.4%, according to the Bureau of Labor Statistics. http://data.bls.gov/cgi-bin/surveymost?su 

“Instead of adopting a fair and accurate CPI for seniors as outlined in the CPI for Seniors Act, HR 5305, the Commission goes in the opposite direction to further cut the COLA for older Americans,” Phillips said. “Reducing benefits and punishing older Americans to pay off the debt is not right or fair, and it must be stopped.”  

Pershing Buys Clearing Relationships from Jefferies & Co.

Pershing LLC and the investment bank, Jefferies & Company, Inc., have reached a agreement where Pershing will assume certain of Jefferies’ clearing and custody relationships with introducing broker-dealers

Pershing, a unit of BNY Mellon, will also offer its processing services and technology solutions to Jefferies’ retail and institutional broker-dealer customers. The terms are undisclosed and are subject to regulatory approval.

Pershing to Offer Jefferson National’s Monument VA  

Jefferson National, manufacturer of a flat-insurance fee variable annuity, said its Monument Advisor VA will be available to fee-based advisors on Pershing Advisor Solutions’ NetX360.

NetX360 is an open-architecture technology platform for fee-based advisors,  including independent registered investment advisors (RIAs), introducing broker-dealer firms and dually registered advisors.

Under the new arrangement, fee-based advisors using NetX360 will be able to consolidate clients’ Jefferson National Monument Advisor variable annuity contract data within their clients’ brokerage accounts, allowing real-time updates of the valuation of the VA contracts on their workstation and, subsequently, on clients’ brokerage account statements.  

Age – Not Finances – Drives Retirement Timing: Schwab  

How do 50-something baby boomers approach fundamental questions about when it’s time to retire? According to a new Charles Schwab survey, 46% have a target date or age in mind, 38% have a target number in mind, and 34% have neither.

And what do retirees actually do? About 47% of retirees said they actually did retire when they reached their target date or age; another 27% said they retired when they reached their financial target; and 38% said they had neither a financial nor date or age target in mind leading up to retirement.

Schwab also surveyed baby boomers about their feelings on Social Security and found that, compared to the general population, 50- to 60-year-olds have far higher expectations for Social Security in retirement.

Over half (55%) of 50- to 60-year-olds are counting on Social Security to supplement their retirement income, compared to 37% for all Americans. While 46% of all Americans aren’t counting on Social Security, only 26% of 50-somethings aren’t counting on it.

Americans’ Retirement Fears Revealed

In a recent survey from Edward Jones, nearly a quarter (23%) of Americans said not being able to pay for healthcare costs in retirement was their top fear, a percentage that has actually decreased over the last four years.

In 2006, when Americans were polled on this topic, 30% said paying for healthcare was their greatest fear. The survey also found that 19% of Americans are worried about having to work longer to supplement retirement savings versus 12% in 2006.

Americans between the ages of 55 and 64 are considerably more worried (35%) about not being able to cover healthcare costs than those of lower age brackets but not as worried as those polled in 2006 (43%). Gender also influenced this sentiment, as 27% percent of women indicated that they were most concerned about healthcare costs, while only 19% of men consider this their greatest fear post retirement.

The study of 1,008 respondents, which was conducted by Opinion Research Corporation on behalf of Edward Jones, revealed that a large percentage of Americans also rank “having to work longer to supplement retirement savings” (19%) and “having to rely on others for support” (19%) as major concerns as they approach retirement. Respondents between the ages of 45 and 54 showed the most anxiety (26%) about having to work longer to supplement their retirement savings.

Americans in lower age brackets (24% of 18-24 year olds and 24% of 25-34 year olds) are most concerned about having to rely on others to support them during retirement. Additionally, within these age groups (18% in each age bracket respectively), respondents also indicated that they are more concerned about “not being able to make provisions for family” than those older than the age of 35.  

Household income also had a considerable effect on respondents’ retirement fears, as Americans with annual incomes between $75,000 and $100,000, indicated that they are most concerned about “having to work longer” (35%) and “having to cut back on a desired lifestyle” (21%). Respondents in lower income brackets are more concerned about “having to rely on others for support” and “not being able to provide for family” after they are gone.

Securian Introduces Lifetime Income Benefit for MultiOption Variable Annuity

Encore Lifetime Income, a guaranteed lifetime income benefit, can now be added to many of the Minnesota Life Insurance Company’s MultiOption annuities for an additional cost. Minnesota Life is a subsidiary of Securian Financial Group, Inc.

After age 59½, annuity owners can withdraw a percentage of the benefit base, which is equal to the owner’s initial contribution (or contract value, if the rider is added at an anniversary of the initial purchase).

The rider also can be purchased as a joint benefit. Provided the benefit’s withdrawal limits are followed, the annual income is guaranteed never to fall and may rise annually without annuitization.

The Encore benefit offers three opportunities for income growth:   

• Ratchets. On each contract anniversary, the benefit base is reset to the current contract value, if higher. This could also raise the amount that can be withdrawn each year. If the benefit’s withdrawal limits aren’t exceeded, the annuity owner never loses those gains to their annual withdrawal amount even if the contract value later declines. A reset could increase the cost of the benefit.

• Roll-ups. For each year (up to 10 years) the annuity owner postpones withdrawals, the benefit base rises 5%. This increases the amount of guaranteed income available in later years, but it does not add to the contract value. When applicable, the benefit base will be increased by either the reset, or the 5% enhancement, whichever is higher.

• Age brackets. The initial guaranteed annual income percentage is based on the age of the annuity owner when the benefit is added, with 4% being the lowest and 6% the highest. Depending on the owner’s age, the percentage could rise annually.

Encore must remain in place seven years and requires use of an approved asset allocation strategy. Encore Lifetime Income is an option cost in MultiOption Advisor B Class, Legend and Extra based on state approval. The cost of Encore is 1.10% (Single), or 1.30% (Joint). The benefit charge may increase upon a reset but will not exceed a maximum of 1.75% (Single), 2.00% (Joint).

ING Expands Stable Value Business  

ING’s U.S. Retirement Services division reports significant growth in its stable value business in 2010, with sales of $3.6 billion through the first three quarters—a three-fold increase over the same period in 2009. 

The growth has been fueled by a focus on ING’s synthetic and separate account contracts, and by leveraging the fixed income expertise of its asset management operations, ING Investment Management, the Netherlands-based company said in a release. 

ING’s U.S. Retirement Services has about $277 billion in combined assets under administration and management, and serves all sizes and segments of the defined contribution market.  

The company’s stable value team has added staff this year as it grows the business through plan sponsors, consultants and intermediaries.  New positions have been created in product management, sales and operations.

“ING has been providing stable value solutions to plan sponsors and their employees for over three decades, building up leadership and expertise in this space,” said Rick Mason, President of Corporate Markets for ING U.S. Retirement Services.  “While many wrap providers have reduced their appetite or left the business in the past two years, we’ve strategically positioned ourselves to grow in response to market demand.”

Stable value investment options, which are available exclusively to defined contribution savings plans, are designed to preserve capital and provide steady returns for participants. Stable value was one of the only asset classes to avoid losses and even deliver positive returns for participants throughout the 2008-2009 financial crisis, ING said.    

With Savings, Does Quantity Trump Quality? 

What matters more: How much a person saves or how they save it?

A new study from Charles Schwab, a major 401(k) plan provider, suggests that for most plan participants the answer is: How much.

Passive forms of guidance such as automatic enrollment and automatic savings escalations and the employer matching contribution have at least as large an impact on participants’ lifetime accumulations as the investment guidance they receive, according to a new survey of 1,005 of the 755,000 participants in 911 plans served by Schwab Retirement Plan Services, Inc.  

After 30 years, the study asserted, a hypothetical 35-year-old participant earning $50,000 (with 2% annual wage increases) who started with a 3% deferral and gradually increased it to 8% would have $321,000 at retirement, assuming a 5% average annual growth rate. If the same person stayed at 3%, the accumulation would be only $128,000.  

“Asset allocation is important, but people really need to save their way to retirement,” said Steve Anderson, head of Schwab Retirement Plan Services. 

The study found:

• 69% of respondents rated the employer match as the biggest driver of participation. One in four said they chose not to enroll because their employer did not offer a match. Almost three in four of sponsors of Schwab plans offer a match.

• Firms with automatic enrollment averaged 88% participation in 2009, compared to 73% participation in firms without automatic enrollment. Plans that introduced auto-enrollment in 2005 saw an average 15% increase in enrollment on average by 2009, compared to an average one percent decline in enrollment among plans not offering auto-enrollment.

• In all Schwab-serviced plans, participation averaged 76% in firms offering an employer match and 70% in firms without a match.

• 83% of participants enrolled in an automatic savings program remained at the increased contribution rate a year after enrollment.

• Up to 25% of participants save at the employer match ceiling. Participants would save more if an employer matched 50% up to a 6% payroll deduction than if the employer matched 100% up to 3%.

An earlier Schwab study showed:

• 70% of participants who receive 401(k) advice increase their deferral rates and those savings rates nearly double as a result, from 5% to 10% of pay.

• Participants who receive advice have a minimum of eight asset classes in their 401(k) portfolio compared to fewer than four for those choosing their own investments.

• 92% of advice users stayed the course in their 401(k) portfolios from July 2008 through February 2009.

Name Game: ING DIRECT Helps Small Plan Sponsors Pick the Right Plan 

ING DIRECT’s ShareBuilder 401k, a provider of retirement plans for small businesses, has revamped its product names and services to help business owners compare different 401(k) plan types and select the one appropriate for their firm.

The new product names include Individual 401k (for owner-only companies), Simplified 401k (designed to help employee-based businesses maximize contributions and automatically satisfy government tests), Customized 401k (for flexible matching and vesting options), and Tiered Profit Sharing 401k (enabling businesses to reward employees by group, tenure or age).

ShareBuilder 401k plans are comprised of exchange-traded funds (ETFs) from iShares, SPDR and PowerShares, rather than mutual funds. A registered investment advisor, ShareBuilder shares in the investment fiduciary role with its clients. The ShareBuilder Investment Committee manages the evaluation and selection of the fund line-up and model portfolios automatically for employers and their participants. 

All ShareBuilder 401k products offer auto-enrollment, auto-rebalancing, Roth, signature-ready 5500s and much more.  Each plan provies access to 401(k) consultants, customer success managers, implementation specialists and customer care for each participant.

© 2010 RIJ Publishing LLC. All rights reserved.

American Funds is considered the “go-to” provider of large-cap growth and large-cap value funds among registered investment advisors, according to a new report from Cogent Research.

Virtually all advisors who use mutual funds include large-cap growth or value funds in their lineup; 39% use large-cap American Funds product for the growth portion and 31% for the value.  

BlackRock, American Funds’ nearest competitor in these two asset classes, is named as the “go-to” fund provider by 7% and 6% of advisors, respectively.

No single fund company dominates among advisors seeking mid-cap, small-cap, or international product offerings, according to Cogent’s Advisor Trends in Asset Class Mix 2010TM, a report based on a nationally representative survey of over 1,400 registered advisors.

American Funds dominate all channels except for the registered investment advisor (RIA) channel, where Vanguard Group, Fidelity Investments, and, to a lesser extent, DFA (Dimensional Fund Advisors) pose a challenge. 

In all six style boxes comprised of mid-cap and small-cap asset classes, Fidelity Investments and Franklin Templeton are just a few points behind American Funds for advisors who name them as “go-to” providers in these categories.

Franklin Templeton is strong among Regional and Bank channel advisors. “There’s a lot more competition… outside of the large-cap arena,” said Tony Ferreira, Managing Director of Cogent’s Wealth Management practice. “At least a half dozen fund companies are in the hunt within the mid- and small-cap fund space.”

“Take The Hartford and Lord Abbett, for example,” he added. “Among Regional [broker-dealers], these two players match or surpass what a number of larger competitors, including American Funds, are doing in all three mid-cap categories.”

For international equity funds, American Funds and Franklin Templeton were named by 25% and 17% of advisors respectively as their “go-to” provider. Beyond those two providers there are at least 30 contenders each with their own small piece of the pie.

© 2010 RIJ Publishing LLC. All rights reserved.

The National Employment Savings Trust (NEST), the U.K.’s state-sponsored defined contribution plan, has ruled out any direct investments in infrastructure, commodities and high yield assets in its first few years of existence, IPE.com reported.

“We won’t be investing in a single infrastructure fund, though, or a single commodities fund, or a single high-yield fund until we get bigger,” said Mark Fawcett, CEO of the program. The fund could get some exposure to those asset classes through its diversified beta fund, however.

The fund isn’t required to invest in UK equities, Fawcett said, but its overall global equity mandate will allow for 10% to be invested in local equities.

While it is still undecided whether NEST will link its pensions to the consumer price index (CPI) or the retail price index, Fawcett acknowledged the government had recently deemed CPI the appropriate measure for pensioners.

Fawcett hoped that, in time, the program would clear internally, lowering the cost and minimizing selling and buying, as the constant influx of new members would create ongoing demand for funds sold by members who are retiring.

He said that with the help of target-dated funds, NEST would be able to minimise confusion and allow people to simply set a retirement date, allowing the default investment strategy to then adjust as the pension age approached.

However, the notion of high risk and return, as well as low risk and return, socially responsible investment funds and religiously compliant funds are still being considered, and final details will be announced in the new year when trustees unveil the scheme’s Statement of Investment Principles.

As for the ultimate size of the scheme after launch, Fawcett said it was impossible to predict, as the soft launch will still require the employees of select companies to opt into the scheme.

Fawcett said that “hedge funds might have a place, certainly, at some point” in the program, but their huge performance fees conflict with the program’s low-fee philosophy. “A lot of pension funds are going into hedge funds at the moment, but it’s perhaps not the first place we’re likely to go,” he added.

© 2010 RIJ Publishing LLC. All rights reserved.

A research brief released by the National Academy of Social Insurance (NASI) describes what it calls a program of affordable Social Security reforms that most or many Americans would support.  

The new policy paper, Strengthening Social Security for the Long Run, by NASI president Janice M. Gregory, Thomas N. Bethell, Virginia P. Reno, and Benjamin W. Veghte.

While Congress addressed the immediate funding crisis the program faced in 1983, it did nothing to resolve the program’s long-term deficit except to call for phasing in an increase in the retirement age from 65 to 67. That benefit reduction is still being phased in today, the report explains. Congress did not add any new revenue, even though providing future revenue had been an accepted practice in the past.

The Social Security program today does not face the same kind of crisis it did in 1983, when a short-term financing problem occurred.  Nor is its cost ballooning out of control: Even though the percent of the population receiving Social Security benefits will increase from about 17% today to 25% in 75 years, the cost of the program as a percent of the economy will increase only from about 5% to about 6%.  

But NASI sees three reasons to doubt the future adequacy of Social Security benefits. First, average benefits are only about $14,000 today; second, benefits are projected to decline as a percent of prior earnings; third, other sources of retirement income are becoming less secure and less adequate.

Covering the projected long-term shortfall facing Social Security would require revenue increases equal to slightly more than 2% of taxable payroll over the next 75 years, according to the authors. That revenue could be raised by lifting the FICA contributions cap to again cover 90% of earnings “as Congress intended and scheduling potential FICA rate increases for points in the distant future when additional funds would strengthen the program,” NASI said in a release.

© 2010 RIJ Publishing LLC. All rights reserved.

Former Federal Reserve vice chair Alice Rivlin, a member of President Obama’s deficit-reduction commission and co-chair of a separate 19-member group sponsored by the Bipartisan Policy Center in Washington, today proposed a 6.5 percent national sales tax to reduce the U.S. budget deficit.

Rivlin’s recommendations come as week after the commission’s co-chairmen, Erskine Bowles and Alan Simpson released a draft proposal and two weeks before the commission’s recommendations are to be delivered to Congress.

As reported by Bloomberg News, Rivlin, a Democrat, and former New Mexico Republican Senator Pete Domenici, are offering a more aggressive approach to tax increases and cuts to Medicare than the Bowles-Simpson plan did.

Similar to the Bowles-Simpson proposals, the Rivlin plan would lower income tax rates while eliminating most deductions and credits. It would replace the home mortgage and charitable contribution deductions with 15% refundable credits.

The plan also makes $756 billion in cuts to health care costs through 2020, including raising Medicare premiums from 25% to 35% over five years, and starts a premium support program to limit growth in federal spending on the health-care program for the elderly. It also attempts to spark economic growth with a one-year Social Security payroll tax holiday designed to create 2.5 million jobs.

“It is a fundamental difference” with the Bowles-Simpson plan, said Steve Bell, a scholar at the Bipartisan Policy Center. “They assume that this deficit reduction plan in and of itself is sufficient. We don’t.”

On Social Security, instead of raising the retirement age, as in the Bowles-Simpson plan, the Rivlin group proposes a gradual increase in the amount of wages subject to payroll taxes, currently $106,800, over the next 38 years to cover 90% of all wages. It would also trim the annual cost-of- living adjustments and reduce the growth in benefits for the top 25% of beneficiaries.

The Rivlin-Domenici plan seeks to illustrate why a combination of spending cuts and tax increases is the only way to stabilize the debt by 2020. According to their report, targeting domestic discretionary spending cuts alone would require eliminating almost everything from law enforcement and border security to education and food and drug inspection.   

The nation also cannot grow fast enough to grow its way out of the deficit, the  report says. To stabilize the debt at 60% of GDP, the economy would have to grow at a sustained rate of more than 6% a year for at least the next 10 years—more than 1.5 points faster than in any decade since World War II. 

Finally, raising taxes on wealthy Americans won’t by itself solve the problem, the report says. Reducing deficits to manageable levels by the end of the decade would require raising rates on the top two income brackets to 86% and 91%, the report says.

© 2010 RIJ Publishing LLC. All rights reserved.

A new survey of millionaire investors commissioned by U.S. Bank and conducted online by Harris Interactive offers a fresh look at how this group managed their assets through the recession and how they are investing today.

“The vast majority of millionaire investors have persevered and remained in the market,” said Mark Jordahl, president of U.S. Bank Wealth Management Group. “They haven’t overreacted. They’ve maintained a balanced approach to risk and its potential rewards, and they are confident about achieving their long-term investment goals over the next six to ten years.”

The Private Client Reserve of U.S. Bank Millionaire Investor Insights Annual Survey, which looks at investment attitudes, behaviors, risk profile and strategies of millionaire investors, was conducted between September 27 and October 15 among 1,609 U.S. households with investable assets of $1 million or more.

Some of the findings challenge conventional assumptions about investor behavior since the economic and market downturn began. The highlights:

• 92% of millionaires have not abandoned the stock market, with 43% currently engaged in moderate to heavy buying or selling and 49% waiting for the right opportunity to buy or sell.  
• 20% of millionaires who lost value in their investments since 2008 have already seen their investments return to pre-2008 levels, and 90% indicated that their investments performed better or about the same as other investors since the beginning of 2008.
• 47% say their investment risk tolerance has not changed during the last three years and only one in 10 say they are not willing to take any investment losses in the current investment market.
• In the past three years, 47% percent of millionaires made no change in their allocation to equities, 42% made no change in their allocation to fixed income, and 47% made no change in their allocation to cash.
• 72% said the U.S. stock market performance has a major or moderate impact on their investment strategies.
• Many (43%) are currently engaged in moderate to heavy buying or selling to take advantage of market opportunities, and 49% are looking for the right opportunity to buy or sell.

• 20% percent have already seen the value of their investments return to pre-2008 levels, and 54% feel it will take up to five years for their investments to get to where they were prior to 2008.
• 90%say their investments performed better or about the same as other investors.

• Many millionaires (45%t) say they have become more conservative with regard to their investment risk tolerance during the past three years, but 47% say their investment risk tolerance has not changed.
• A vast majority (93%) says worries about their investment performance have not caused them to lose sleep at night.
• Only 10% of millionaires said their primary motivation for investing is to protect their wealth by limiting losses.
• A majority (61%) are investing to maintain their wealth by seeking a rate of return that outpaces inflation, fees and taxes or to increase their wealth by seeking portfolio growth (29%).
• 80% are personally involved in making decisions about their investment portfolios, with 20% delegating most or all of their investment decisions to their financial advisor.
• A majority of millionaires (70%) trust their financial advisor to help them grow their investments and 71% say they get advice from others about how to invest, but go with their own instincts.

The Private Client Reserve of U.S. Bank inaugural Millionaire Investor Insights Annual Survey monitors the investment attitudes, behaviors, risk profile and strategies of millionaire investors in the United States. The national survey was conducted online for U.S. Bank by Harris Interactive between September 27 and October 15, 2010 among 1,609 respondents over age 18 with $1 million or more in household investable assets (excluding primary and secondary residence and assets held in employer-sponsored retirement plans).  

© 2010 RIJ Publishing LLC. All rights reserved.

On Wednesday, the chairmen of the Obama administration’s bi-partisan National Commission on Fiscal Responsibility and Reform released a PowerPoint draft of their recommendations for reducing the annual federal budget deficit, now over $1 trillion as a result of spending to mitigate the effects of the financial crisis.

The draft proposes a wide range of cuts throughout the federal budget, but makes a point of strengthening Social Security without privatizing it and suggests simplifying the IRS code to three tax brackets with a maximum marginal income tax rate of 35% and a corporate tax rate of 26%.

But the commission’s modest proposal to question all $1.1 trillion worth of annual “tax expenditures,” including tax deferral in retirement plans, has some worried.

“We are deeply concerned that recommendations from the draft report issued today from the chairs of the Deficit Reduction Commission would eliminate tax incentives for retirement savings and negatively impact the ability of working Americans to effectively prepare for retirement,” wrote Brian Graff, CEO of the American Society of Pension Professionals and Actuaries, in a release.

“As drafted, one of the options listed in the proposal would eliminate the tax incentive for employers to offer retirement plans to their employees—which ultimately hits low and moderate income workers the hardest. Data prepared by the Employee Benefit Research Institute (EBRI) suggests that only 5% of workers save for retirement on their own, without the benefit of an employer sponsored plan. By contrast, 70% of moderate to low income workers earning between $30,000 and $50,000 participate in employer sponsored retirement plans when they are offered,” the release continued.

“The proposed “Zero Option Plan” would decimate the savings rate by eliminating tax incentives for contributing to employer-sponsored retirement plans, such as 401(k) plans, likely triggering mass terminations of company retirement plans—directly impacting a worker’s ability to save for retirement,” Graff said.

The plan reduces the budget deficit to “sustainable levels” by 2015 but doesn’t predict a balanced federal budget until 2037—when the youngest boomers will have just begun taking required minimum distributions.

Social Security reform is covered on pages 42 through 50 of the draft proposal. The recommendations include preventing the 22% across-the-board benefit cuts anticipated in 2037, making the benefit formula more progressive so that high-income recipients receive relatively less, taxing 90% of covered earnings by 2050, indexing the retirement age to longevity gains, dampening COLAs and many other specific optional measures.

The draft proposal also includes recommendations to:

• Cut defense spending by $100 billion in 2015, with savings to come from overhead reduction, overseas base closings, and reductions in defense contracting.
• Freeze federal non-defense pay for three years.
• Reduce the federal workforce by 10% and eliminate 250,000 non-defense contracting jobs.
• Eliminate all $1.1 trillion in “tax expenditures,” i.e. subsidies, and reinstate them on a case-by-case basis.
• Limit mortgage deduction to primary residences, cap at $500,000 mortgages and eliminate tax deduction for home equity loans.
• Cap the federal share of Medicaid payments for long-term care.

© 2010 RIJ Publishing LLC. All rights reserved.

Financial Engines Reports 3Q 2010 Results

 Financial Engines, the provider of investment management and advice to employees in retirement plans, today reported financial results for its third quarter ended September 30, 2010.

“Financial Engines increased its assets under management by 45% and our revenue by 31% year over year,” said Jeff Maggioncalda, president and CEO of the Palo Alto-based, NASDAQ-listed company. “When we started the business fourteen years ago, we bet on the long-term trends of demographics and the growing importance of the 401(k), and these trends continue to fuel our growth.”

Financial results for the third quarter of 2010 compared to the third quarter of 2009:

• Revenue increased 31% to $28.8 million for the third quarter of 2010 from $22.0 million for the third quarter of 2009
• Professional Management revenue increased 46% to $19.9 million for the third quarter of 2010 from $13.6 million for the third quarter of 2009
• Net income was $53.4 million, or $1.15 per diluted share, for the third quarter of 2010, due in part to an income tax benefit of $49.9 million, compared to net income of $2.1 million, or $0.06 per diluted share, for the third quarter of 2009

• Non-GAAP Adjusted Net Income increased 57% to $4.7 million for the third quarter of 2010 from $3.0 million for the third quarter of 2009
• Non-GAAP Adjusted Earnings Per Share were $0.10 for the third quarter of 2010 compared to $0.07 for the third quarter of 2009
• Non-GAAP Adjusted EBITDA increased 27% to $7.1 million for the third quarter of 2010 from $5.6 million for the third quarter of 2009

Key operating metrics as of September 30, 2010:

• Assets under contract (“AUC”) were $344 billion
• Assets under management (“AUM”) were $34 billion
• Members in Professional Management were 463,000
• Asset enrollment rates for companies where services have been available for 26 months or more averaged 11.9%

Jackson National Sets VA Sales Record

 Jackson National Life recorded more variable annuity sales during the first nine months of 2010 than during any previous full-year reporting period, generating $10.5 billion in premium or 57% more than in the same period in 2009. Total sales and deposits were $14.3 billion during the first nine months of 2010, up 37% over the same period last year.    

Jackson, an indirect wholly owned subsidiary of Britain’s Prudential plc, increased its share of the VA market to 10.5% during the first half of 2010 (according to the latest industry data available), up from 6.2% during the same period of the prior year.

In the second quarter of 2010, Jackson’s Perspective II was the top-selling individual retail VA contract for the third consecutive quarter, with sales of $1.88 billion—the highest quarterly retail sales ever recorded for a single contract.  Jackson’s VA asset growth of 45.2% was the highest increase in the industry from June 30, 2009 to June 30, 2010.

To preserve capital, Jackson continues to manage fixed index and fixed annuities, although low interest rates have dampened demand for those products. Jackson sold $1.3 billion in fixed index annuities (FIAs) during the first nine months of 2010, compared to $1.6 billion during the same period in 2009. Sales of traditional deferred fixed annuities totaled $1.0 billion, versus $1.3 billion during the first nine months of 2009.

Despite these results, Jackson increased its FIA market share from 5.5% during the first half of 2009 to 6% during the first half of 2010, and its traditional deferred fixed annuity market share from 2.3% during the first half of 2009 to 3.1% during the first half of 2010.

Curian Capital, Jackson’s separately managed accounts subsidiary, collected record deposits of nearly $1.5 billion during the first nine months of 2010, up 91% over the same period of the prior year. As of September 30, 2010, Curian’s assets under management (AUM) were $4.8 billion, up from nearly $3.6 billion at the end of 2009.

In 2010, Jackson added two new optional lifetime guaranteed minimum withdrawal benefits (GMWBs) to its VA products. LifeGuard Freedom 6 Net GMWB, introduced in May, allows investors to offset their tax liability by increasing their available withdrawal amounts. The LifeGuard Freedom Flex GMWB, introduced in October,  allows investors to customize their benefit. Jackson added American Funds and BlackRock funds to its VA investment options in 2010.

As of September 30, Jackson National was rated A+ (superior) by A.M. Best, AA (very strong) by Standard & Poor’s, AA (very strong) by Fitch and A1 (good) by Moody’s. 

Strong 3Q Annuity Sales at Allianz Life

Allianz Life Insurance Company of North America reported premium of $2.9 billion for the third quarter of 2010, a 63% year-over-year increase, and growth of 11% over last quarter’s strong sales.

For the quarter, fixed index annuity sales were $1.9 billion of premium, up 36% from the third quarter of last year. Variable annuity sales exceeded expectations, the company said, with premium of $800 million, up 275% above the third quarter of 2009.

The company posted operating profit of $57 million for its third quarter 2010, down from the second quarter due to the poor market environment and low interest rates. Total assets under management grew to $85 billion, up from $75 billion a year ago.

“Annuity sales are on the rise, and innovations such as inflation protection and increasing income options are making them extremely attractive, which, combined with a strong distribution network, is driving our top line results,” CEO Gary C. Bhojwani said.

Pershing Platform Adds Janus and PacLife Funds

Pershing LLC, a unit of BNY Mellon, has added Janus Funds and Pacific Life Funds to FundVest, its no-transaction-fee mutual fund platform. Those funds are now available to clients of Pershing’s introducing broker-dealer customers and to clients of independent registered investment advisors who use Pershing Advisor Solutions LLC. FundVest offers over 3,700 load and no-load mutual funds from more than 230 fund companies without regular transaction fees.  

Penn Mutual Launches Inflation-Sensitive VA

Penn Mutual Life Insurance Company, based in Horsham, Pa., has launched the Inflation Protector variable annuity, whose living benefit rider provides contract owners with an income base that increases with the Consumer Price Index (CPI-U) or market performance (whichever is greater) annually in both the deferral and withdrawal phases.

The product features two withdrawal options, life or 20 years certain. Single and joint coverage is available. Withdrawal percentages can be as high as 6% depending on the age of the annuitant and how long the contract has been in force at the time of the first living benefit withdrawal.  

Nationwide Enriches Online Participant Education  

Nationwide Retirement Plans now offers an “On Your Side” Interactive Retirement Planner to help participants and plan advisors establish savings goals, track progress, and project “what if” scenarios.

The tool has ambitious goals. According to a release from Nationwide, it allows participants to take an “in-depth look at their retirement situation” and helps improve their “unique retirement outlook—all in about 10 minutes.”

In addition to the new retirement planner, Nationwide Retirement Plans has enhanced its home page, where participants can assess investment options, learn about investing and link to the new Interactive Retirement Planner. Nationwide also introduced a new Rollover Center, where participants can learn about IRAs and rollover options, compare traditional and Roth IRAs and talk with a financial professional.

American Equity Earns $27.6 Million in 3Q 2010     

 American Equity Investment Life Holding Company, a leading underwriter of index and fixed rate annuities, reported 2010 third quarter operating income of $27.6 million, or $0.45 per diluted common share, a 2% decrease compared to 2009 third quarter operating income of $28.2 million, or $0.47 per common diluted share.

Highlights for the third quarter of 2010 and the first nine months of 2010 include:

• “A-“ (Excellent) rating from A.M. Best
• Risked based capital ratio (RBC) of approximately 363%. 
• Net income for the third quarter of 2010 was $20.5 million, compared to a net loss of $3.0 million for the same period in 2009.

• 12% annuity sales increase, to $3.1 billion, for the first nine months of 2010 compared to $2.8 billion for the same period in 2009.
• 15% increase in invested assets at September 30, 2010, to $18.5 billion, compared to $16.1 billion a year earlier.
• Investment spread on annuity liabilities was 3.09% for the third quarter of 2010 compared to 3.13% for the same period in 2009.
• Book value per share including accumulated other comprehensive income of increased to $18.03 compared to $13.08 at December 31, 2009. 

“Sales of new annuities reached record levels during the third quarter of 2010 with average monthly sales volumes exceeding $400 million per month. The increase in the pace of sales reflects continued high demand for safe money products as a result of market volatility as well as the relatively lower rates available on competing products such as bank certificates of deposit. In addition, rate reductions by competitors helped drive a higher volume of sales to American Equity,” the company said in a release.

“Finally, the demise of Securities and Exchange Commission Rule 151A has lifted an impediment to sales caused by the uncertainty surrounding the impact of that Rule on the index annuity market.”  

Genworth Announces $250 Million Repayment  

Genworth Financial, Inc., announced that it has repaid $250 million of outstanding borrowings under its five-year revolving credit facilities, paying $125 million of outstanding borrowings under each of the two facilities. Following such repayments, the company has approximately $240 million of borrowings outstanding under each of these facilities, totaling $480 million. These facilities expire in May and August of 2012.

ING Plans IPOs to Pay Back Dutch Bailout

ING, the Dutch financial services company, is planning separate initial public offerings of its U.S. and European insurance businesses to satisfy regulators’ demands for divestitures, Ifa.com reported. The IPOs are “most likely” in 2012, said ING CEO Jan H.M. Hommen, but could happen late next year.

Hommen said the company was making “good progress” toward creating stand-alone insurance and banking companies, and that while a single IPO remained a possibility, the company was preparing for a “base case” of two for the insurance units.

One would be a “Europe-led I.P.O. with solid cash flow combined with strong growth positions in developing markets.” The other would be a “separate U.S.-focused I.P.O. with a leading franchise in retirement services.”

Under pressure from the European competition authorities, ING agreed last October to separate its insurance and banking businesses in exchange for its 2008 bailout by the Dutch government, which gave ING €10 billion, or $14 billion, and took on most of the risk on its U.S. real estate portfolio. The regulators had worried that the government aid gave ING an unfair advantage over rivals.

A banking analyst at SNS Securities in Amsterdam estimated the book value of ING’s insurance portfolio at about €21 billion. The proceeds of the sale of the insurance business would help pay the company’s remaining €7.5 billion debt to the Dutch government.  Shares of ING rose 2.9 percent in Amsterdam afternoon trading.

ING, based in Amsterdam, reported that third-quarter profit declined 26% percent from a year earlier, to €371 million, or $511 million, as it wrote down the goodwill on the U.S. insurance business by €513 million. Without the writedown, it said, underlying profit rose 43% to €1 billion. Goodwill represents the excess of an asset’s purchase price over its fair market value. 

Financial Reform Not Dead in 112th Congress: Wolters Kluwer

The Republican triumphs in the mid-term elections will shift the agenda for financial regulation in the 112th Congress, but reform isn’t dead-on-arrival, according to Wolters Kluwer, a provider of CCH and Aspen information and software solutions. 

“”Financial reform will most certainly shift priorities in the 112th Congress, but it will continue. “There is a growing bipartisan consensus for certain areas of reform, including issues related to reform of government-sponsored enterprises such as Fannie Mae and Freddie Mac… and reform of the Public Company Accounting Oversight Board,” said Wolters Kluwer Law & Business Principal Securities Law Analyst James Hamilton, a lead analyst for Wolters Kluwer Law & Business’ Dodd-Frank Wall Street Reform and Consumer Protection Act: Law, Explanation and Analysis.

In late July, the House Financial Services Committee reported out the U.S. Covered Bond Act, HR 5823. It has bipartisan support, having been cosponsored by Rep. Spencer Bachus (R-AL) and Rep. Paul Kanjorski (D-PA).

Bachus, who is slated to become the chairman of the House Financial Services Committee, recently outlined the principles for draft legislation to reform the secondary mortgage market, with a covered bond market as an integral part of the effort. Among the provisions included in this legislation are:

• Sunset over a four-year period the current government-sponsored enterprises (GSE) conservatorship and wind down the federal subsidies granted through their charters;
• Introduce full transparency and accountability to the secondary market;
• Reduce leverage by phasing in, over four years, capital requirements that are consistent with global standards for large, complex financial institutions; and
• Create a regulatory safe-harbor for mortgages that meet underwriting standards consistent with the Federal Reserve Board’s final Home Owner’s Equity Protection Act (HOEPA) rule.

“The safe-harbor provision is designed to encourage the return of private capital to the mortgage finance market by giving investors transparency and confidence that the loans they purchase meet appropriate underwriting standards, including the ability to repay and the integrity of the documentation,” said Hamilton. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which establishes only a limited safe harbor from legal liability. 

A centerpiece of the Bachus reform legislation is the establishment of a regulatory framework for a U.S. covered bond market, Hamilton said. A covered bond is a form of debt issued by a financial institution where a specific set of high quality assets, typically loans, are set aside into a pool for the benefit of the bondholders. The issuers of covered bonds are responsible to their bondholders for the risk posed by the underlying loan pool. 

“Covered bonds are a source of private mortgage market financing which have worked well in many European countries, and they are used as a private market solution to the need for market participants to have skin in the game,” said Hamilton.

Another piece of legislation that appears to be bipartisan involves the reform of Public Company Accounting Oversight Board (PCAOB) procedures. PCAOB Acting Chair Dan Goelzer has asked for legislation amending Sarbanes-Oxley so that Board disciplinary hearings against individual auditors and accounting firms will be public.

No ‘Lost Decade’ for Diligent Savers: Fidelity

Pre-retiree participants who steadily contributed to a 401(k) plan with Fidelity for the past 10 years more than doubled their account balances in that time, Fidelity Investments reported.

The average account balance for these pre-retirees, aged 55 years or older, rose to $211,300 by the end of the third quarter of this year from $96,000 ten years ago. Pre-retirees with a contribution rate at or above 8% this year showed average balances increasing more than 130 percent over the past 10 years to $291,700, from $125,600.

“The past decade was certainly not a lost decade for participants who remained committed to saving even through all of the market’s ups and downs,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments.

The same group of pre-retirees had a 10-year, average cumulative time-weighted personal rate of return (PRR) of 18.3%, while the S&P 500 returned a negative 4.2%. 

Chapman Named Chief Risk Officer at Securian

Leslie Chapman, vice president and chief actuary, Securian Financial Group, was appointed chief risk officer by the board of directors in October.

Chapman oversaw the five-year, multifaceted development of Securian’s enterprise risk management (ERM) program, which all Securian business units and financial management departments use.

A graduate of Moorhead State University, Moorhead, Minn., Chapman joined Securian in 1976 as an actuarial trainee. She has held increasingly responsible positions in several areas of the company, including taxation, rating agency relations, and risk management.

New York Life Reports Strong Third Quarter

New York Life Insurance Company, the largest mutual life insurer in the U.S., today announced strong gains in sales of life insurance, income annuities, long-term care insurance and mutual funds through the first nine months of 2010.

The market share leader in fixed immediate annuities, New York Life reported record sales of $1.3 billion in the first nine months of 2010.  This represents an increase of 4% over the same period last year led by strong sales through New York Life agents and third party distribution channels.  

“We’re on pace to achieve a seventh consecutive year of record sales of lifetime income annuities,” said Chris Blunt, executive vice president in charge of Retirement Income Security. 

Sales of New York Life’s mutual funds (MainStay Funds) are up 43%, totaling more than $7 billion in the first nine months of the year, with strong performances from third party channels accounting for approximately $6 billion of the total.

Individual life insurance sales increased 47% through September, compared to the previous all-time record for sales in the first nine months of 2009. This growth is being driven by agents, with life insurance sales through the company’s 11,500-member national field force up 34% over the same 2009 period.

The company’s sales of long-term care insurance are up 10% over last year. New York Life reported earlier this year that for the sixth consecutive year, it will pay a dividend to its LTCSelect Premier long-term care insurance policyholders. 

© 2010 RIJ Publishing LLC. All rights reserved.

Led by demand for bond funds, the global mutual fund industry is on pace for $850 billion in net inflows to stock and bond mutual funds (including ETFs and variable annuity subaccounts) in calendar 2010, according to Strategic Insight.

More than half of those flows, which are on track to fall short of the $890 net inflows in 2009, are expected to go into U.S.-domiciled funds. Flows in 2009 and 2010 mark a resumption of fund investing after the net outflows of 2008.

Strategic Insight’s projections for the full year are based on SI’s Simfund databases and projections for November and December (and for October for some international markets).

In the U.S., Strategic Insight expects 2010 full-year flows to stock and bond funds to hit $400 billion, including ETFs and funds underlying VAs. That would be just the second time in history that long-term fund flows topped $400 billion; a record $500 billion flowed into long-term funds in the U.S. in 2009.  

Flows into bond funds and bond ETFs are on pace to top $300 billion for 2010, crossing the $300 billion mark for just the second time. In October, U.S. investors put $30 billion into bond and stock funds, including just over $22 billion into bond funds and roughly $7.5 billion into stock funds (including $10 billion into international and global equity funds, and $2.5 billion out of domestic equity funds).

Globally, more than 60% of long-term fund flows are going into bond funds, including short- and intermediate-duration bond funds that appeal to investors seeking higher yields than those available in bank deposits or money-market funds.

Some fund buyers are also seeking out bond funds as a way to participate in financial markets without taking on equity risk, as investors continue to be weighed down by concerns about economic growth, especially in the U.S., and about debt problems, especially in Europe.

“Many of the forces driving investors’ choices this year remain in place for 2011 and maybe beyond,” said Avi Nachmany, SI’s Director of Research. “Financial insecurity, zero cash yields (being extended by the Federal Reserve’s recently announced quantitative easing), the depreciating U.S. Dollar, and the expansion of bond fund mandates (to search globally and in the U.S. for higher-yielding securities) all support the continuation of strong bond fund demand.”

© 2010 RIJ Publishing LLC. All rights reserved.

More than half of respondents (51%) to a recent survey think it’s likelier that scientists will clone dinosaurs in their lifetime than that Congress will save Social Security, and 77% of those with children at home say their child is more likely to catch a foul ball in the seats at a baseball game than cash a Social Security check.

The survey was sponsored by the ING Retirement Research Institute and conducted by Mathew Greenwald & Associates.

A majority of the 1,000 workers surveyed (87%) said they could be saving more in their employer-sponsored retirement plan. Nearly two-thirds (64%) said their employer-sponsored retirement plan accounts for all or most of their retirement portfolio.

Many participants apparently rely on “guesswork” when setting contribution levels, and don’t fully understand the importance and long-term impact of small increases in contribution rates. Nearly two-thirds (65%) determined their contribution rate themselves, and 21% said they “go by gut feeling.”

Of those participants who are not contributing the maximum to their retirement plan, 87% said they could afford to increase their annual contribution by 1% of their annual salary; 59% said they could up their contribution by 3% of salary; and 32% said they could afford a 5% increase.

Nearly half of the plan participants polled (44%) said that “if they didn’t have a retirement plan at work, they probably wouldn’t be saving for retirement at all.” Most respondents (58%) said their employer-sponsored retirement account was their first investment and 52% said their plan was the main place they learned about investing.

When asked to estimate the lifetime value of a 2% increase in their contribution rate, 40% underestimated by 50% or more and 32% over-estimated by 50% or more.

ING has posted a calculator to its website to demonstrate the potential long-term financial impact of contribution rate changes. The calculator is available to the public at http://ing.us/.

© 2010 RIJ Publishing LLC. All rights reserved.

Defined contribution (DC) plan sponsors are unaware or unsure about many key aspects of target date funds, despite the fact more plans than ever are offering such options, according to a recent survey of 6,300 DC plan sponsors by Janus Capital Group and Asset International Inc.

“A broad gap [exists] between plans’ utilization and understanding of target date funds,” the survey showed. The poll, which Janus has conducted annually for four years, focuses on DC plan sponsors’ qualified default investment alternative (QDIA) fund selection, construction, monitoring and satisfaction.

The survey showed that:

• Compared to 2009 findings, more plans don’t know what the end date of the glide path is in their target date funds (50% compared to 32% last year).

• More than one-third of all plans are not familiar with the “to” or “through” glide path dilemma.

• 35% of plans (compared to 29% last year) are not sure what the best QDIA option is for their employee population.

“The findings reveal a disconnect,” said Russ Shipman, senior v.p. and managing director of Janus’ Retirement Strategy Group. “Respondents believe they’re less than well informed about their chosen target date offerings, but remain confident their employees understand the products and use them correctly.”

Plan sponsor perceptions of target date funds, as compared to other QDIA options, are shifting, the survey showed. An increasing number of sponsors indicated they believe balanced funds and target risk funds are the best QDIAs for their employee populations. Just 34% of respondents indicated they believe target date funds are the best QDIA for their plan, down from 57% last year.

When asked to compare QDIA options based on fees, transparency, overall performance, risk management and correct usage by participants, balanced funds saw gains in each category compared to last year, while target date funds saw declines.

“With these fairly pronounced changes in plan sponsor perceptions about QDIA options, it seems possible, if not probable, that many early target date adopters are rethinking their selections,” said Shipman. “Target date funds are surely a good choice for many, but we continue to believe that balanced funds and other target risk solutions will hold their own—due largely to their simplicity and proven performance histories.”  

© 2010 RIJ Publishing LLC. All rights reserved.

The results of the recent mid-term elections is more likely to boost the U.S. economy more than the Fed’s decision to buy $600 billion in Treasury bonds will, according to a survey of members of the Association for Financial Professionals (AFP).

At the AFP’s annual conference, 54% of those surveyed, including bankers as well as CFOs and treasurers at companies with median revenues of $1.5 billion, said the elections would have a beneficial impact on general business conditions and 51% said the elections would help their own organizations.

Regarding the Fed’s “quantitative easing” efforts, known as QE2, only 42% thought it would enhance their own company’s prospects in the next 12 months. A minority (22% percent) said that anti-business sentiment in Washington, perceived or real, was “holding companies back.”

One in five cited uncertainty about future tax policy and one in three cited uncertainty about the extent of other regulations as contributing to recent business paralysis. Two in ten financial professionals said their organizations have delayed investment decisions because of the current risk-averse climate.

Other factors cited as hurting investment were weak consumer demand (40%), a weak job market (24%), commodity price volatility (12%), and foreign exchange volatility (9%).

Among respondents, 42% said that their organizations’ access to debt markets or bank lending has improved over the last six months, and 40% percent expect it to continue to improve over the next 12 months.  

© 2010 RIJ Publishing LLC. All rights reserved.