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Don’t Let Your Politics Shoot You in the Financial Foot

Posted on November 10, 2010 by Russell Wild -

Joan, a friend of mine, called me on the phone and told me that, thanks to the government and its “inane economic policies,” the dollar was due to get walloped. She asked me how to invest in foreign currencies. I cautioned against it, explaining that financial markets are unpredictable, but she insisted. The dollar rose, and her “investment” (I’d call it a gamble) tanked.

Ken, another friend, certain that Washington’s policies were driving this country to ruin, had kept his money in a savings account for six years. What started off as $70,000, thanks to six years of low-but-steady inflation and taxes on his interest, was now worth something less. That same $70,000, invested in a well-diversified, modestly aggressive portfolio, rebalanced yearly, would have been worth $100,000 or more.

These experiences taught me that politics and investing shouldn’t mix. Whether you are liberal or conservative, please don’t let your politics or your clients’ politics shoot anyone in the investment foot.

In our hyper-intense political environment, I’ve seen more and more of this knee-jerk reaction in which people want to move their investments to reflect their political leanings. The ease of transfer of assets has exacerbated this tendency, too, as I’ve noted in my book, Exchange-Traded Funds for Dummies. ETFs are in many ways the perfect vehicle for these politico-investors. Hate what’s happening in Washington? Invest your money in South Africa, Malaysia, or South Korea. Hate the oil industry? You can plunk your money in an alternative-energy ETF. It’s easy now to target specific market sectors for your political support or opposition.

Ken (the same guy mentioned above), for example, is certain that the exportation of jobs and the resulting squeeze on wages will slaughter the Middle Class. No one will be left to frequent the malls. Stores will be boarded up. The stock market will collapse. He is shocked that it hasn’t happened yet. “How can Wall Street be so blind?!” he asks me. Ken can easily short the market with the ProShares Short S&P 500 ETF. But I wouldn’t advise him to do so.

Wall Street, where many smart and educated people hang out, is not so blind, Ken. They know that even if you are right, even if history proves the administration to be as terrible as you think it is, even if polarized politics is driving this country down, it doesn’t necessarily mean that stocks will suffer.

Experienced financial advisors know that market movements in the short term, and possibly well beyond, are largely random. You’ve read the studies that show the huge disconnect between market returns and practically anything and else going on in the economy. But how do you convey this to clients?

I suggest that in addition to appeals to data or economic theory, you share with your clients anecdotes that will stick in their minds. Consider these tidbits:

Researchers at the London School of Business found that a comparison of stock market returns around the world shows a generally inverse relationship between total market returns and a nation’s economic growth rate.
And speaking of the British: England started off the past century as the undisputed #1 World Power. It ended the century with a lost empire, sky-high unemployment, and crumbling inner cities. During that time, of course, the United States came to dominate the known universe. The return of British large stocks over past 50 years? 11.0%. The return of U.S. large stocks over the past 50 years: 9.1%. Looking to small stocks, the Brits beat us by a mile.
Consider the history of disaster. (Always fun to do!) 1918, the year of the flu pandemic, the worst disease outbreak in modern world history, was a good year for stocks. In 1942 Japan attacked Pearl Harbor and Hitler marched across Europe, but it too was a great year for stocks. The year of the Cuban Missile Crisis—and the near destruction of the entire world—wasn’t so bad for stocks. In contrast, in 1929, when the market began its Mother of all Nosedives, nothing terrible was going on. Ditto for April 2000, the start of the three-year bear market that shredded so many Americans’ 401(k)s.
Compare China to India. China’s growth in gross domestic product has been blowing the doors off India’s, and most other nations’ GDP for the past several years. Headlines of China’s domination of the world economy fill the media.Year-to-date return of The China Fund: 18.53%. Year-to-date return of The India Fund: 24.71%.

I can’t explain all of these apparent contradictions. No one can, really. They are what they are. Stock market returns in the United States have averaged about 10% a year over the past 75 years. That’s way higher than just about any other investment. Will it continue? I don’t know.

But the stock market has been pretty darn resilient so far.

If you intend to be rational about investing, separate politics from portfolio. I hope that each one of you voted your conscience on Nov. 2. But I also hope that each of you—and your clients—invest without your political biases coming into play.

Russell Wild is a fee-only advisor in Allentown, Pa. He has written numerous investment and business publications, including Exchange-Traded Funds for Dummies.

End the Bush Tax Cuts

Posted on November 3, 2010 by Editor Test -

Now that the Republicans have recaptured the House of Representatives—the returns showed a whopping 246-189 advantage for the GOP as of 11 p.m. Eastern time yesterday—we can look forward to gridlock or worse in Washington over the next two years. Forget compromise or progress. Any conservative legislation (or investigation) that the House leadership cooks up will either die in the Senate or perish under the President’s veto pen.

During the lame duck session, however, the Democrats will have to face the dilemma posed by the Bush tax cut extensions. I hope they eliminate the tax cut entirely. Not just for individuals earning over $200,000 a year and couples earning over $250,000. For everyone. If we’re serious about reducing the federal budget deficit, this should be a no-brainer.

For anyone who wants to avoid burying our children in debt, any other course of action would be tantamount to financial infanticide. Extending the cuts indefinitely for everyone would add $3 trillion to the national debt over the next 10 years, according to the recent Pew Fiscal Analysis Initiative. Extending the cuts to those earning under a quarter or a fifth of a million dollars a year would still add $2.3 trillion to the debt.

Killing the tax cuts will be spun as a tax hike. Conservatives will prefer to sustain it with cuts in spending. But where will the cuts come from? A 10% across the board reduction in Social Security benefits over the next 10 years would offset only 36% of the cost of keeping the cuts for another 10 years, the Pew research shows. Eliminating foreign aid would offset another 12%. It would take an across-the-board 6.8% cut in all government spending (except debt service) over the 10 years to cover the entire cost of extending all the tax cuts during that time. That’s what it would cost just to break even on the cuts.

If we’re serious about reducing the deficit, perhaps we should eliminate the Bush tax cuts and cut federal spending by 6.8%. Better yet, we should focus on shrinking two of the largest and least productive burdens on the public purse: the bloated medical industry and the Cold War military machine. We should spend less on heroic life-saving measures for 90-year-olds, and we should stop wasting money (and the lives of 19-year-olds) on foreign wars. The ill-conceived, badly executed adventures in Iraq and Afghanistan have cost over $1 trillion, and we have nothing to show for it but grief.

AIG’s Asset Sale and IPO Raise $36.7 Bn

Posted on November 3, 2010 by Editor Test -

American International Group, Inc. (AIG) has raised nearly $37 billion to repay the United States government through the sale of its American Life Insurance Company (ALICO) unit to MetLife and an initial public offering by its AIA Group Limited (AIA) units.

The revenue from the transactions will help AIG pay back the Federal Reserve Bank of New York credit facility, which used taxpayer funds to bail out AIG during the financial crisis. The MetLife securities will be sold over time, subject to certain lock-up provisions and market conditions, to provide additional funds to repay the government.

AIG sold ALICO to MetLife for some $16.2 billion, including about $7.2 billion in cash and the rest in MetLife securities. The cash portion includes an upward purchase price adjustment of approximately $400 million.

On October 22 and 29, respectively, AIG disclosed in regulatory filings that the gross proceeds from the initial public offer of AIA were $17.8 billion and the exercise of the over-allotment option for this offering increased the gross proceeds to $20.51 billion. Together, the AIA and ALICO transactions raised approximately $36.71 billion, including $27.71 billion in cash.

Proceeds from the transactions are being placed in an escrow fund with the FRBNY until the closing of the recapitalization plan, expected no later than the first quarter of 2011. As of October 27, 2010, the principal and interest owed to the FRBNY on the credit facility was approximately $20 billion.

Diversified Investment Advisors Introduces In-Plan Income Option

Posted on November 3, 2010 by Editor Test -

Diversified Investment Advisors has introduced SecurePath for Life, an in-plan option that guarantees income for life, allows defined contribution retirement plan participants to invest in stocks and bonds and gives them significant control over their accounts.

Designed for plan participants age 50 or older, SecurePath for Life is built around a series of target date funds (TDFs) from the Vanguard Group. Participants in SecurePath for Life can transfer money to other options in their employer’s plan at any time. Lifetime income can start as early as age 55.

As described in a press release, SecurePath for Life appears to be a group annuity provided by Transamerica Financial Life that wraps a guaranteed lifetime withdrawal benefit (GLWB) around a portfolio of target-date funds-of-funds, not unlike Prudential’s IncomeFlex and Great-West’s SecureFoundation products. One difference might be that DIA wraps its GLWB around Vanguard’s low-cost, index fund-based TDFs.

“Diversified has introduced SecurePath for Life on the heels of heightened interest in Washington in providing retirement plan participants with access to arrangements that offer lifetime streams of income after retirement,” said Gerry Katz, senior vice president of Diversified.

Harrison, NY-based Diversified Investment Advisors, Inc. provides customized defined contribution and defined benefit retirement plan administration, participant communication and open architecture investment solutions for mid- to large-sized organizations covering 1.7 million participants.

Good Day at BlackRock

Posted on November 2, 2010 by Kerry Pechter -

One of the obstacles to adding income-oriented investment options to defined contribution plans—options that would give 401(k) participants some of the benefits of a traditional pension plan—has been an absence of recordkeeping standards.

Until recently, recordkeepers had to develop different software for every income product on the market. If one of their plan sponsor clients decided to change recordkeepers or change income products, new software would be needed. To avoid that headache, sponsors avoided income options.

That hurdle has largely been cleared. A task force of IT specialists and managers from 30 interested (and competing) asset managers and retirement plan service providers like BlackRock, The Hartford, Prudential and others, working through the retirement plan services trade organization, the SPARK Institute, have over the past year created industry-wide standards that codify the system requirements for income products.

Where Babel reigned, there’s now a common language, and where there were multiple proprietary administrative designs, there’s now an open architecture. And “that’s a very important step in the evolution of these products in the marketplace,” said Chip Castille, head of BlackRock’s defined contribution business.

“It makes perfect sense for DC plans to become a source of retirement income,” he told RIJ. “And this provides a set of core functionalities that recordkeepers, asset managers and plan sponsors need to deliver income efficiently in a DC plan. This open standard paves the way for income options in DC plans.”

“This is intended to be a game changer,” agreed Larry Goldbrum, general counsel of the SPARK Institute. “For customer-facing recordkeepers to make income products available, we needed a group of standards. It also helps solve the portability problem.” That is, plan sponsors can change recordkeepers with less cost and hassle.

“Our goal was to create a uniform set of standards to be used by recordkeepers and product providers for the various lifetime income solutions that are being rolled out,” said Kelly Hewes, director of product management for The Hartford’s Retirement Plans Group. “That was our marching orders, to get out standards. Whether the product had a fixed or variable design, recordkeepers could plug these standards in.”

The Hartford created an in-plan income option in 2006 but has never taken it live, Hewes said. She noted that, industry-wide, there are “about eight in-plan options active and four to seven more in development.” The rise of in-plan guaranteed income options also allows insurance companies to participate in the $4 trillion defined contribution market.

Some of the best-known products are Prudential’s IncomeFlex, MetLife’s Personal Pension Builder, Great-West’s SecureFoundation, Genworth’s ClearCourse and John Hancock’s GIFL. More recently, Mutual of Omaha and Diversified Investment Advisers have introduced options. The products include deferred income annuities as well as variable annuities with guaranteed lifetime withdrawal (GLWB) or guaranteed minimum income benefits (GMIB), usually combined with target date funds.

It’s too early to celebrate a new era in DC plans, however.

Jamie Kalamarides, senior vice president of Retirement Strategies & Solutions for Prudential Retirement, whose company offers a stand-alone living benefit that guarantees lifetime payouts from target date funds, said, “It’s like creating an MP3 standard. It allows providers to have a standard way of communicating with recordkeepers. It’s a necessary but not a sufficient condition” for making more plan sponsors willing to adding annuity or annuity-like options to their plans.

Other critical steps include Department of Labor clarification of its guidelines for acceptable participant education and advice practices and passage of proposed legislation around reporting the performance or projected outcomes of income options on participant statements. Most importantly, providers want a more specific “safe harbor” that identifies a method for choosing an annuity provider that will exempt plan sponsors from responsibility for a provider’s failure to fulfill its obligations.

SponsorMatch Becomes LifePath

The fruits of the standards appeared almost immediately, when BlackRock and SunGard announced a software partnership, based on the standards, that would make it easier for plan sponsors to adopt BlackRock’s LifePath Retirement Income Program, which puts a deferred income annuity inside one of BlackRock’s existing LifePath target date funds.

LifePath Retirement Income was first introduced in late 2007 as SponsorMatch. It allowed plan participants to direct their personal 401(k) contributions into target date funds provided by asset manager BlackRock (created when Merrill Lynch spun off its proprietary mutual funds; Barclays Global Investors and iShares are now part of it) and directed their sponsor’s matching contribution into ladders of deferred income annuities provided by MetLife.

That product, introduced just before the financial crisis, made little headway in the market. Castille was reluctant to say how many plan sponsors adopted it or how many assets it attracted, if any. At some point, with no public announcement, the name SponsorMatch and the idea of dedicating the match to the income annuity were abandoned.

In its current form, Castille said, the LifePath program invites participants to invest in age-appropriate target date funds. The TDF fund manager will direct part of the contributions into underlying mutual funds and part into the annual purchase of a deferred income annuity. When the participant retires, and the target date fund reaches “maturity,” 53% of the fund assets will be invested in a fixed annuity, Castille said.

Since target date funds are Qualified Default Investment Alternatives, he said, plan participants can be defaulted into the product when they join the plan. When they leave the plan or retire, participants can either take the income or opt for a lump sum equal to the “fair value” of their account, based on their contributions and interest rates. Since the annuity is part of the TDF, Castille said, “We believe it meets QDIA standards.”

Establishing standards “wasn’t difficult from a computer programming standpoint,” said Goldbrum. It mainly involved defining the types of data that various income products will require from plan participants, providers and sponsors.

“But at the beginning stage of the initiative I thought there was no way we’ll get this done because there were so many different service models,” he said. “It was hard to imagine how we would get our arms around everything and get one set of standards that everyone could live with. But we did it.”

Industry observers welcome the development. “The SPARK standards… remove one of the biggest obstacles to bringing DB into DC plans,” said Garth Bernard, CEO of Sharper Financial Group and a long-time advocate of income annuities.

“No one could administer [an income product] except the product provider on its own proprietary platforms—which by definition is not a shining example of an open market. SPARK in effect cleared the junk out of a stopped sink,” he added. “Now there is an opportunity for unbridled innovation in the DB-in-DC arena.”

There are still unresolved questions, however. The standards increase portability for plan sponsors, but not necessarily for participants. For instance, a participant who owns a plan’s LifePath fund can’t keep contributing to it when he leaves that plan, and he can’t roll it into an IRA because it’s part of a collective investment trust (CIT). To consolidate it with another tax-deferred account, he’d have to cash out of it.

Like the 401(k) system itself, the in-plan income options themselves are likely to work better for some participants than others. They’ll probably work best for highly compensated employees who spend many years in a single plan and who can afford to make five-figure contributions each year. They won’t work as well for average workers who change jobs several times during their careers. In short, they bring back some of DB’s advantages, but also some of its flaws.

A Quiet Transition at Jackson Life

Posted on November 1, 2010 by Editor Test -

In a transition that is expected to have little material impact on operations, Mike Wells, Jackson National Life’s vice chairman and chief operation officer, will take over as president and CEO of Jackson National Life at the end of 2010, succeeding Clark Manning.

Wells will also become executive director of the board ofLondon-based Prudential plc, Jackson’s parent, which is no relation to Prudential Financial in the U.S. He joined Jackson National Life in 1995 as president of the company’s distribution arm and has been COO for nine years.

Wells told RIJ that his role won’t change a lot when his title changes.

“Almost 90% of the firm already reported to me,” he said in an interview. “Right now I go to London about 10 times a year. That will probably change to monthly.” His team will not change either, he added. “The whole crew has been here about 15 years. We’re a pretty experienced team. Most of us can do each other’s jobs.”

Jackson National Life is one of the variable annuity issuers, along with MetLife and Prudential, which have taken advantage of the shakeout in the variable annuity industry that followed the 2008-2009 financial crisis. They’ve picked up market share as other issuers have, by choice or necessity, reduced their exposure to the product.

The firm sold $6.82 billion worth of benefit-rich variable annuity contracts in the first half of 2010, up from just $3.76 billion in the first half of 2009. From June 2009 to June 2010, its market share jumped 3.66%, to almost 11%. Only Prudential Financial had a greater gain in market share, jumping 4.87% to 15.66%.

Wells said that his company has thrived because of its VA’s stable pricing and generous features, and because of the firm’s consistent wholesaling effort throughout the VA arms race and bust.

“This is a cyclical business,” he told RIJ. “Going into the last peak of the cycle, everyone was fighting for market share. You saw the most mispricing, the craziest promotions. We’re at our least competitive in a situation like that, because we hedge fully. Then all of a sudden, our competitors were pulling products. Products that they said were fine were gone. But we were there with the same product.”

In the ensuing flight to financially-strong issuers, Jackson National—which is also not publicly traded and therefore didn’t have a battered share price over the winter of 2008-2009, and was not involved in the Troubled Assets Relief Program (TARP)—was there to pick the business lost by companies that were.

“Our business reputation was enhanced by our behavior and by the behavior of our competitors,” Wells added. “The [subsequent] growth in the number of reps selling our product and the growth in the dollar amount per ticket, all add up to the dollar amount [of quarterly VA sales] that you’re seeing now. We’ve increased our guarantees, but we’re also investing heavily on the service and technology side. We know service has to be high to deal with the top reps.”

During his tenure at Jackson National, Wells was involved in the 1998 creation of National Planning Holdings, a network of four independent broker-dealers, and Curian Capital LLC, a separately managed accounts provider, in 2003. From 1995, when Wells joined Jackson, to 2009, total sales and deposits rose to $15.2 billion from $2.3 billion.

Quote of the Week

Posted on October 31, 2010 by Editor Test -

The Bucket

Posted on October 31, 2010 by Editorial Staff -

New Participant-Ed Program from The Hartford

In synch with National Save for Retirement Week, The Hartford Financial Services Group has launched a new educational program to defined contribution plan participants, including a salary deferral illustration tool to highlight the value of long-term saving.

The program, called “Your Retirement. Plan for Life,” will be available to more than 1.5 million plan participants in some 32,000 401(k), 403(b) and 457 plan sponsors with a total of $43.8 billion in assets (as of June 30, 2010), The Hartford said.

The program is also available to all new retirement plan sponsors and participants who sign up with The Hartford.

One personalized tool in the program, called the “deferral illustrator,” illustrates the effect of different salary deferral percentages on take-home pay, taxes, and potential for long-term retirement savings. It also shows the cost, in terms of lost savings potential, of delaying contributions.

The program includes a risk tolerance questionnaire, an asset allocation overview, presentations delivered via the Brainshark web-based communication platform, articles and calculators. Special initiatives will target younger workers who are less likely to participate in a retirement plan and workers over age 50 who are eligible to make “catch-up” contributions.

The Hartford also has 70 retirement education consultants who conduct on-site seminars around the country and work with participants individually. The educational efforts are typically coordinated with financial advisors, who can exert the biggest influence on participation within the plan, The Hartford said in a release.

Males, Females Think Differently about Retirement: Ameriprise

The recession has altered many Americans’ attitudes and preparation for retirement, but Women and men are not responding in the same way to the Great Recession, according to the New Retirement Mindscape IIstudy, sponsored by Ameriprise Financial.

The results of the study show that women, though less confident about their financial situation, are more “enthusiastic” than men about reaching retirement (74% vs. 65%). The number of men who “enjoy retirement a great deal” has dropped to 56% from 67% since 2005, but the number of women do has remained steady.

The survey also found:

– Women are more likely than men (28% vs. 22%) to cite an illness or health issue as the one thing that made them seriously think about retirement.

– The number of retired women who named illness as their primary retirement trigger increased substantially from 2005 to 2010 (18% vs. 28%), while the number of men saying so stayed at about 20%.

– Women were also more likely to cite a spouse or partner retiring, while men were more likely to mention a significant birthday, as the reason they began thinking about retirement.

– Both men and women said they are more likely to seek professional financial advice in 2010 than they were in 2005, but women remain more likely than men (46% vs. 38%) to do so.

– Pre-retired women are more likely than men to place great importance on being able to spend time with family (77% vs. 68%) and volunteer (31% vs. 22%) during retirement. Women are less likely than men to believe they will return to work either full- or part-time (27% vs. 38%).

– More retired women than men value spending time with family (72% vs. 58%), volunteering (31% vs. 18%) and traveling (27% vs. 19%).

– Fewer women than men are currently working during retirement (29% vs. 40%).

The New Retirement Mindscape II study and its predecessor, New Retirement Mindscape, were commissioned by Ameriprise Financial, Inc. and conducted by telephone by Harris Interactive in May 2010 and August 2005 among 2,007 (2010) and 2,000 (2005) U.S. adults age 40-75.

AARP Launches Retirement Calculator

In an effort to improve upon existing retirement calculators, including its own, AARP (the organization that advocates on behalf of Americans over age 50) has launched a new version of its Retirement Calculator.

“Based on user feedback and a changing retirement landscape, AARP revamped its retirement calculator to enhance usability, but maintain accuracy in its results,” said Jean Setzfand, Director of Financial Security at AARP, in a release.

New features of the AARP Retirement Calculator include:

– The ability to develop a retirement plan for a dual-income home.

– The ability to calculate and include individual Social Security benefit estimates as a part of retirement income.

– Easy-to-navigate tabs.

– The ability to experiment with various retirement scenarios.

Upon completion of the calculator, individuals will be provided links to a number of AARP resources to learn more about Social Security, financial planning and health care in retirement. The new AARP Retirement Calculator does not promote any product or service.

Gen Y Money Coach and MassMutual Team Up

MassMutual’s Retirement Services Division continues its web-based RetireSmart national participant seminar series with “Can’t Afford NOT to Save,” featuring Farnoosh Torabi, the Generation Y money coach and best-selling author.

The online seminar will be webcast Wednesday, Nov. 10 at noon Eastern Time. The educational series is for MassMutual participants and plan sponsors, and will focus on establishing and achieving personal retirement goals, putting money to work and boosting earning potential.

MassMutual retirement plan clients can register by logging in to their retirement plan account at MassMutual.com/retiresmart and clicking on the “Can’t Afford NOT To Save” event banner on the home page.

The RetireSmart seminars consist of a half-hour presentation followed by a half-hour of Q&A. A seminar, Understanding How Social Security and Medicare Impact Your Retirement. was presented by Daniel Moraski, a Social Security official.

AXA Equitable Airs Third ‘Retirement Reality Show’ Episode

AXA Equitable Life has released the third in its series of “Retirement Reality Show” videos. The series explores the attitudes, behaviors and experiences of Americans as they prepare for and live through retirement.

Called, “Protecting Retirement – Not a Walk in the Park,” the new episode shows a series of brief interviews with more or less random passersby in Manhattan’s Central Park, who talk about how they “protect what’s important to them.”

“We discovered that people are clear about insurance coverage for protecting their cars, homes, health and lives, but when it comes to protecting one of their most important and valuable assets—their retirement nest eggs—confusion reigns,” said Chris Winans, senior vice president, External Affairs at AXA Equitable.

AXA Equitable’s “Retirement Reality Show” video series complements the company’s ongoing research on the issues surrounding retirement. The new video can be found at The Source, AXA Equitable’s multi-media Web page that provides information and thought leadership on a wide array of financial protection and retirement planning topics.

Previous episodes in AXA Equitable’s “Retirement Reality Show” series include “Is Retirement a Shore Thing? Wall Street Hope Meets Boardwalk Reality” and “A Garden State of Mind: Expecting the Unexpected?”

IRI and RegEd to Launch NAIC Required Annuity Training Platform

The Insured Retirement Institute (IRI) and RegEd have agreed to offer a product-specific training platform and four-hour course delivery program that complies with the educational mandate of the new NAIC Suitability Regulation.

This industry-wide, “one-stop” platform will include insurer-produced product specific training, as well as state-approved required training. The platform will launch on November 22, allowing producers to meet Iowa’s implementation date of January 1, 2011.

The platform will provide:

Access to all training requirements.
A dedicated location where insurers can publish product-specific training courses.
The ability to print certificates of completion.
An e-mail system enabling insurers to notify producers of new or updated product specific training requirements.
Customized data feeds and real-time search tools to help insurers and broker/dealers to help meet their compliance requirements.

“More than 750,000 financial services professionals visit RegEd every year to complete compliance requirements and a significant percentage of these individuals overlap with IRI’s membership,” said John M. Schoebel, CEO of RegEd.

$10,000 Awaits Collegians with Best Retirement Essay, Video

In 2009, 40 teams from 21 colleges and universities, including Harvard University, the Air Force Academy, the University of Michigan and Boston University, participated in the first year iOMe Challenge, established by Plan Administrators, Inc., or PAi, to get members of the Millenial generation to think about retirement.

Now in its second year, the contest calls for college students to write an essay of up to 10,000 words and one-minute or less video. The 2010 contest, sponsored by Sage North America, a provider of financial management software, requires contestants to illustrate what life will be like for them in 40 years if their savings rate increases to 6%, versus if it does not. The deadlines for submission are October 31 and November 21 respectively.

Last year, a team from Western Michigan University won the contest. This year’s winning team will receive $10,000 and a free trip to Washington D.C. to present their entry to members of Congress. Their faculty advisor will receive $2,000. Three honorable mention prizes of $2,500 for teams and $1,000 for advisors will be awarded.

Judging will take place January 16, 2011, and the awards reception will be held in Washington D.C. in March 2011. Details are available at www.iomechallenge.org.

Money Mishaps Linked to Early Dementia

Posted on October 31, 2010 by Editor Test -

A decline in an older person’s ability to understand or manage his or her own financial affairs may be a sign of impending dementia, The New York Times reported Sunday.

The problem, which is not new but is expected to increase as the U.S. ages, recently prompted meetings between the Financial Industry Regulatory Authority (FINRA), financial services companies, and the Alzheimer’s Association to develop guidelines for the way advisors should deal with clients who have signs of dementia, such as trouble remembering or reasoning.

The meeting stemmed from a 2009 survey of 350 advisors by Fidelity Investments. In the survey, 84% of advisors said they thought they had clients with symptoms of dementia. Only 4% felt prepared to deal with those clients. Half said they were reluctant to broach the subject of dementia with clients.

The Times article, published October 31, also related several anecdotes about people with dementia, including the director of an OB-GYN clinic, who made disastrous financial decisions, such as giving money away to lottery schemes or signing fraudulent contracts.

MetLife Posts Record U.S. Annuity Sales in 3Q 2010

Posted on October 31, 2010 by Editor Test -

After a net loss of $1.8 billion in the first nine months of 2009, MetLife posted net income of $2.1 billion from U.S. business operations during the same period this year, according to the company’s third-quarter earnings report. Overall earnings were $878 million.

Net income from U.S. operations rose to $764 million in the third quarter of 2010, up from $633 million in the prior quarter and $38 million in 2009. Operating earnings for retirement products were $149 million in the third quarter of 2010, up 42% from third quarter 2009 due to growth in the business and higher net investment income.

MetLife saw record U.S. annuity sales of about $5 billion during the third quarter of this year, up 25% over the third quarter of 2009. The $5 billion included variable annuity sales of $4.7 billion, up 35% from the previous year.

Other third quarter 2010 earnings highlights for MetLife:

– Premiums, fees and other revenues of $8.6 billion.

– Operating earnings of $0.99 per share, up 14% from $0.87 per share in 3Q 2009.

– Net income of $0.32 per share versus net loss of $0.79 per share in 3Q 2009.

– Book value per share up 24% Over 3Q 2009; 8% over 2Q 2010.

– U.S. business premiums, fees and other revenues were $7.1 billion, down slightly as an 11% increase in retirement products was offset by lower pension closeout sales in Corporate Benefit Funding.

– Premiums, fees and other revenues for retirement products, including U.S. annuities, were $738 million, up 11% due to increased fee revenue.

How the Tax Stalemate Might Play Out

Posted on October 27, 2010 by Editor Test -

Death and taxes are equally inevitable, said Andy Friedman, author of the political website, theWashingtonUpdate.com. The only difference, he quipped, is that “death doesn’t get worse whenever Congress meets and taxes do.”

Friedman, an entertaining impromptu pundit with no discernable political affiliation, spoke at the IRI conference in Chicago this week and delivered a humor-laced forecast of how the current stalemate over the Bush tax cuts might play out.

Regarding those tax cuts, which are set to expire at the end of this year and which Congress delayed acting on until after next week’s election, Friedman predicts “we’ll see a permanent extension of the lower income tax, capital gains tax and dividend tax rates for middle class families.”

But the income tax rate for wealthy individuals and families will go to almost 40% from 35%, the long-term capital gains tax rate will go to 20% from 15% and dividends will be taxed as ordinary income—instead of at 15%.

Friedman thinks Congress might offer some sweetener to individuals making more than $200,000 (or households making over $250,000) by extending current rates to 2012 or raising the income threshold for exclusion from lower rates to $500,000 or even $1 million.

The president has also left open the possibility of capping the tax on dividend income at 20%, Friedman said, but that would cost the government an estimated $100 billion in tax receipts. (The wealthy also face a 3.8% Medicare contribution tax on investment income, starting in 2013).

As for the estate tax, Friedman believes Congress will reinstate it with a $3.5 million exclusion ($7 million for couples) and a 45% tax rate. “Everybody wants that,” he said. If Congress doesn’t act on the estate tax either this year or retroactively in 2011, the estate tax will automatically return in 2011 at a $1 million exclusion level ($2 million for couples) and a 55% rate.

High-income taxpayers would be smart, Friedman said, to harvest their long-term capital gains before the tax rate goes up, defer their gifts to charity until tax rates go up, and accelerate their ordinary income if possible. As tax rates rise, tax-deferred vehicles like variable annuities and tax-exempt instruments like municipal bonds will become more appealing, he added.

Contrary to Tea Party assertions that government spending is “out of control,” the Obama administration and the Democrats have been in a deficit reduction mode since last spring, Friedman said. That’s one reason why they haven’t thrown more stimulus money at the unemployment problem.

“Four or five months ago, there was a big shift that didn’t get much attention in the media,” Friedman said: Right before Memorial Day and shortly after the Greek debt crisis, the Democrats balked at an extension of unemployment benefits and declared, “We have moved from stimulus to deficit reduction.”

But deficit reduction is harder than it looks, Friedman said, because there’s not much discretionary spending at the federal level. Only 12% of the $3.5 trillion that the government now spends each year goes to fund government agencies, from the Centers for Disease Control to the Bureau of Land Management.

By contrast, over $2 trillion goes to Social Security, Medicare and other entitlements, $782 billion goes to defense, and then there’s interest on the ever-mounting national debt. Tax revenues are about $2.1 trillion a year. Even if Congress cut discretionary spending by a third, Friedman said, it would reduce overall spending by about four percent.

“You can’t solve this problem by cutting spending alone. We’re going to have to raise taxes. Taxes are going up,” he added.

Entitlement reform is inevitable. “Sometime soon all eyes will have to turn to Social Security reform,” Friedman said. Raising the retirement age will be politically “hard to do,” but expect the FICA wage base limit to either go up or disappear entirely and for Social Security benefits to be means-tested—that is, reduced or eliminated for the wealthy.

In sum, Friedman believes that our growing fiscal imbalances are due in part to circumstances beyond our control, and beyond the control of governments around the world. “We don’t have a budget problem,” he said. “We have a demographic problem: the aging of the Boomers.” Our fractured politics may simply be a symptom of that.

Quote of the Week

Posted on October 27, 2010 by Editor Test -

A Case of Election Psychosis

Posted on October 27, 2010 by Editor Test -

Election Day was less than a week away. The Undecided Voter was stressed. He made an appointment with a dually-licensed psychiatrist who practiced behavioral finance and annuity framing on the side.

“Doc, I can’t sleep. I stay up all night, trying to figure out who I should vote for,” said the Undecided Voter as he reclined on the leather longue.

“How does that make you feel?” said the psychiatrist.

“Indecisive,” said the U.V. “And anxious.”

“I see,” the psychiatrist said, tapping a note into his Blackberry. “And what is it about not knowing who to vote for that makes you anxious?”

“If I vote Democratic, then Barack Obama, Nancy Pelosi and Harry Reid will raise my marginal tax rates and over-regulate me. They’ll confiscate my 401(k) savings and use it to fund outrageous pensions for policemen and school teachers.”

“Then perhaps you should vote Republican,” the doctor said.

“If I vote Republican, Christine O’Donnell and Rand Paul will take charge, and that knucklehead Gingrich will pull their strings. They’ll lower my taxes and de-regulate me, but they’ll destroy Social Security and gut Medicare.”

“Let me pose a question,” said the psychiatrist. “Would you rather have a 50% chance of gaining $100, or a 100% chance of gaining $50?”

“Who cares?” said the Undecided Voter. “Bonds are overpriced. Gold is overpriced. The Fed is propping up the stock market and there’s a 50/50 chance of a Double Dip. Some days I think I should be long on small-caps. Other days I think I should load up on TIPS.”

“Ah. Have you considered a variable annuity with a lifetime income rider?” asked the doctor. “Or perhaps a SPIA with a side-fund in equities?”

“I don’t like annuities,” said the U.V. “They’re a terrible investment.”

“You’re looking at them through ‘investment’ glasses,” the psychiatrist empathized. “Try looking at them as insurance. Guarantees aren’t cheap, you know.”

“I don’t know what’s real anymore,” said the Undecided Voter. “Is global warming a serious threat to civilization, or is it a left-wing hoax? Do poor people ride in the cart while rich people pull, or is it the reverse? When we die, are we called to account for our fiduciary lapses, or do we just crumble into dust?”

A complex psychosis, the doctor noted on his PDA. Might call for an equity-indexed annuity. “Looks like we’ve got a lot of work ahead of us,” he said, turning to his appointment book. “Same time next week?”

“At this rate, I’m not sure there will be a next week,” muttered the Undecided Voter. “Doc, how do you deal with the pressure? How do you decide who to vote for?”

“Each one of us has to make his own decisions,” the psychiatrist instructed. “But, in my case I get all the information I need from Fox News. Bill. Glen. Sean. Even that blonde lawyer, what’s-her-name.”

“Ann Coulter?”

“Right. I listen to their arguments, and then I do the opposite of whatever they say,” the doctor said.

“That’s all I need to do?”

“Well, you might also buy a fixed annuity/long-term-care insurance hybrid,” suggested the psychiatrist. “It’s like buying LTC with a big deductible. And if you never need nursing home care, you keep your money. Put a couple of hundred thousand into one of those babies and, I promise, you’ll sleep like a tenured professor.”

Almost Four in 10 U.S. Households Hit By ‘Great Recession’

Posted on October 27, 2010 by Editor Test -

A recent research paper shows that between November 2008 and April 2010 about 39% of U.S. households had either been unemployed, had negative equity in their house or had been in arrears in their house payments. Reductions in spending were common especially following unemployment.

“Effects of the Financial Crisis and Great Recession on American Households,”written by Michael D. Hurd and Susann Rohwedder of the Rand Corporation and published by the National Bureau of Economic Research, suggested that U.S. households generally are “not optimistic about their economic futures.”

“On average expectations about stock market prices and housing prices are pessimistic, particularly long-run expectations. Among workers, expectations about becoming unemployed have recovered somewhat from their low point in May 2009 but still remain high,” the paper said.

These data come from Internet surveys run by RAND Labor and Population in the beginning of November 2008, in February 2009 and every month since May 2009.

Three Ways to Rein in the Runaway Deficit

Posted on October 27, 2010 by Editor Test -

In a new analysis, “Preventing a National Debt Explosion,” the economist Martin S. Feldstein discusses three strategies that, if combined, could reverse the rapid growth of the U.S. national debt and reduce the ratio of debt to Gross Domestic Product (GDP) to less than 50%.

Without changes in tax and spending rules, Feldstein finds, the national debt will rise from 62% of GDP now to more than 100% of GDP by the end of the decade and nearly twice that level within 25 years.

The first strategy, which focuses on the current decade, would “reduce the Administration’s proposed spending increases and tax reductions that would otherwise add $3.8 trillion to the national debt in 2020.”

The second strategy would “augment the tax-financed benefits for Social Security, Medicare and Medicaid with investment-based accounts would permit the higher future spending on health care and pensions with a relatively small increase in saving for such accounts.”

The third strategy focuses on tax exemptions and other subsidies that result in an annual revenue loss of about $1 trillion. “Reducing them could permanently reduce future deficits without increasing marginal tax rates or reducing the rewards for saving, investment, and risk taking,” the paper said.

Feldstein’s paper concludes with a discussion of how the high debt-to-GDP ratio after World War II was reversed and how the last four presidents ended their terms with small primary deficits or primary budget surpluses.

If More Retirees Buy Annuities, Fewer Will Be ‘At Risk’

Posted on October 27, 2010 by Editor Test -

It should come as no surprise: Buying an income annuity can make retirement more financially secure. But an additional discovery in a recent analysis of the National Retirement Risk Index (NRRI) was a slight surprise: High-income households have as much or more to gain from buying an income annuity than other income groups.

The analysis, conducted by the Center for Retirement Research at Boston College, and sponsored by Nationwide Mutual Insurance, shows overall that it’s riskier to try to live off the interest of your savings or to use a 4% drawdown than to buy an inflation-indexed income annuity.

In the aggregate, the percent of U.S. households likely to be ‘at risk’ of not maintaining their standard of living in retirement is 60% without an annuity and 51% with an interest-only retirement income strategy. The at-risk percentage is 53% if households use a four-percent-per year drawdown method in retirement. The NRRI assumes that people work to age 65, receive income from reverse mortgages on their homes and annuitize all of their financial assets. It also assumes that the real rate of interest on savings is 1.9%.

The study also found, when examining households by income level, that high-net worth individuals had the most to gain by annuitizing their assets; they had the most to annuitize. The percent of this group ‘at risk’ was 47% for those who drew down their assets at four percent a year and 57% for those who lived off the interest of their assets (estimated at 1.9 percent annually), compared to only 42% with the annuity.

Morningstar Buys VA Data Business for $14 million

Posted on October 27, 2010 by Editor Test -

Morningstar, Inc., the well-known Chicago-based provider of independent investment research, has agreed to buy the variable annuity product information business Advanced Sales and Marketing Corp., based in Oakbrook Terrace, Ill., for $14.1 million.

The Annuity Intelligence Report (AI Report), one of Advanced Sales’ two product lines, is a web-based service that helps render variable annuity products more understandable to broker-dealers, insurers, advisers and clients.

The AI Report service leverages a proprietary database of more than 1,000 variable annuities that includes “plain-English” translations of prospectuses and other public filings. It helps advisors meet suitability review requirements and properly structuring annuity contracts. The AI Report includes FINRA-reviewed single annuity and side-by-side comparison reports as well as annuity flow data, a contract and benefit selector tool, historical contract data, and optional subaccount data.

The annuity intelligence business serves 170 firms, including broker-dealers, banks, advisory firms, and insurance companies. More than 150,000 financial advisors have access to the AI Report through these firms. Advanced Sales also offers the MaxPlan wholesaler productivity system, a business planning and territory management tool for mutual fund and annuity distributors, which Morningstar is not acquiring.

The purchase will combine “Morningstar’s strength in variable annuity subaccount data and modeling tools with AI Report’s product-level data, and proprietary methodologies,” said Chris Boruff, president of Morningstar’s software division.

After the acquisition is completed, the annuity intelligence business will become part of Morningstar’s advisor software unit. The company plans to keep the Annuity Intelligence Report product name for the foreseeable future and will market it under the Morningstar brand.

Kevin Loffredi, senior vice president and co-founder of ASMC, will continue to manage the annuity intelligence business. Morningstar expects to retain the majority of the business’s employees. Karen (Falat) Larson, president and founder, and Advanced Sales’ chief executive officer, Perry Moore, will continue to run the firms wholesaler productivity business under the new name MaxPlan Solutions, Inc.

BlackRock, SunGard to Ease Administration of In-Plan Annuity

Posted on October 27, 2010 by Editor Test -

BlackRock, which collaborates with MetLife on a program that allows 401(k) plan participants to invest in target-date funds and buy chunks of future guaranteed income, has formed an alliance with SunGard, provider of administrative systems for DC plan sponsors.

The alliance should make it technically easier for DC plan sponsors to adopt the BlackRock-MetLife program, which was once called SponsorMatch but has been rebranded, LifePath Retirement Income. BlackRock provides the target-date mutual funds and MetLife provides the deferred income annuity for the program.

When the program was first launched in 2008, it allowed plan participants to invest their own plan contributions in target-date mutual funds and to use their employer’s matching contribution to purchase future income, a little at a time. Employees could opt out of the program if they changed their mind and the accumulations were portable.

But uptake of the program has been slow. Part of the problem was that funds with an income annuity component add to the administrative complexities and recordkeeping process of DC plans.

“Many plan sponsors have found it challenging to add funds specifically designed to help employees transform their accumulated retirement assets into secure retirement income,” said Chip Castille, managing director and head of BlackRock’s US and Canada defined contribution group. “Now that barrier is being removed.”

SunGard is providing “a technological advancement that will help make retirement income options more readily available to DC plan participants,” said Bob Ward, Chief Operating Officer of SunGard’s Wealth Management Business.

Through the SunGard Global Network (SGN), the BlackRock-SunGard solution will create what the companies call an “income window” for DC plan recordkeeping firms. In short, the SGN will integrate LifePath’s retirement income-generating funds into a plan’s existing administrative and transaction processes.

“The income window, which can be used by any recordkeeping firm, including third-party administrators and advisors using SunGard’s Omni and Relius platforms, will provide access and the ability to trade lifetime retirement income funds through an integrated link to the SGN,” he added.

The SPARK Institute, whose members include a broad cross-section of retirement plan professionals, is also playing a role in the deal. BlackRock and SunGard will be using SPARK’s open architecture information-sharing standards for annuity based, lifetime income funds in retirement plans.

Currently there are about 50 million workers nationwide participating in about 484,000 401(k) plans representing 75% of eligible workers with about $2.6 trillion in assets, or about 30% of all retirement assets. BlackRock is the largest investment-only DC plan provider and the fourth largest U.S. DC provider overall, with $270 billion in assets under management.

A New Brand of VA Conference

Posted on October 27, 2010 by Kerry Pechter -

“Life is good, but we could always use more volume,” said Hal R. Harris, the national sales vice president for individual annuities at Securian, the mutual insurer, as he sipped a cup of Starbucks at the Insured Retirement Institute’s conference in Chicago Monday morning.

The affable Mr. Harris, clad in a sport jacket instead of the more prevalent charcoal suit, noted however that his St. Paul-based company puts limits on its exposure to the risks inherent in its rider-rich VA contracts. “We’ve got a very high rating and we’re very protective of it,” he said.

Conversations with Harris and others attendees at the IRI annual conference suggested that VA issuers are now roughly divided into those that are fully committed to the product (e.g., Prudential, Jackson Life and MetLife), those purposely scaling back since the financial crisis, and those, like Securian, that quietly continue to till modest patches of the VA landscape.

The VA industry as a whole remains a niche business, to the frustration of its boosters. While the industry has total assets of more than $1.3 trillion, net cash flows into VAs in the first half of 2010 were just $9.8 billion, according to Morningstar. The entire VA industry fits into the fund industry’s vest pocket.

Cathy Weatherford, IRI’s president, has, with a reportedly steel grip, thoroughly made over the 20-year-old trade association formerly known as NAVA, the National Association of Variable Annuities. Over the past two years, she has changed the group’s name, relocated its headquarters, replaced its entire staff and refocused IRI as a Washington lobbying force.

Weatherford has not visibly moved the net flow-dial for VAs, however—perhaps because of circumstances beyond her control. The financial crisis, which at one point in 2009 dragged the product’s income guarantees an estimated $250 billion under water and toppled insurance company share prices, unfolded just as she took charge in October 2008.

It’s universally agreed that the organization and its conferences have changed markedly. “That’s exactly what we’re trying to do,” said Bill Loehning of Fidelity, the chair of the conference. Lowell Aronoff, CEO of Cannex, the income annuity data provider, said he enjoyed the speakers and the new agenda. “It’s strategic rather than tactical,” he said.

Topline Flatline

The VA industry’s ongoing frustrations are no secret. In his welcoming address, IRI chairman Jamie Shepherdson, president of Retirement Savings at AXA Equitable (the sixth-ranked seller of VAs in the first half of 2010, with sales of $3.15 billion) gave the industry “fairly terrible grades.”

“Every industry can screw up a good idea,” he said, referring to the VA industry’s use of the guaranteed minimum income benefit, invented in the late 1990s. That innovation was the “best thing that happened to us and the worst thing,” he said. The GMIB offered a new, more flexible payout option for VAs. But it also launched the VA “arms race,” which by 2007 had produced an array of complicated lifetime income riders that were simultaneously expensive and underpriced.

Sales “basically flat-lined between 1998 and 2008,” Shepherdson said, even as the sales of mutual funds and ETFs boomed. Despite the industry’s advantages—tax-deferral, great investment options, generous guarantees, and “an army of wholesalers and attractive compensation,” VA business simply churned out exchanges without generating much new business.

Shepherdson’s call for reform was emphatic but short of specifics. “Our industry has to change,” he said. “We need to change our culture and our operating models. We can come up with simple solutions. On the institutional side, we can come up with IRA solution and 401(k) in plan solutions.”

Almost no specific discussion of VA products followed. In a break with tradition, the lightly attended one-and-one-half-day conference didn’t include any breakout sessions. In years past, small groups discussed specific new products or sales challenges. This year, the one-and-a-half day conference consisted entirely of general sessions where participation was limited to question-and-answer periods.

Even the general sessions were not very specific to VAs, and had an inside-the-Beltway flavor. In his address, Anthony W. Ryan, a Fidelity executive who was a Treasury official under George W. Bush, gave an eyewitness account of a pivotal West Wing meeting in 2008 where President Bush, Treasury Secretary Henry Paulsen and Fed Chairman Ben Bernanke decided to ask Congress for $700 billion to refloat the banks. Ryan’s tale put those officials in a flattering light, but had little to do with annuities.

The next speaker, Prudential Financial’s chairman and CEO, John Strangfeld, was somewhat closer to the point. Of anyone at the conference, he had reason to be optimistic. Prudential Financial is the dominant seller of VAs, with $10.2 billion in sales in the first half of 2010, a 16% market share, and a unique product design with built-in automatic buffers against equity market risk.

Yet even Prudential sees no reason for complacency. Its senior managers have said they would rather see the whole VA market growing rather than merely see their slice grow, and Strangfeld’s overall outlook was muted. “The financial crisis isn’t really over,” he said. “Market volatility will be with us for some time to come.” The retirement income crisis is likely to get worse, he added, and trust in the financial services industry “is at a low point.”

The mea culpas kept coming during a panel discussion on the distribution end of the VA business. “We’re good at serving the high-end customers, not very good at servicing the middle, and terrible at the low end,” said Paul Hatch, head of Investment Strategy and Solutions, Morgan Stanley Smith Barney.

“I’m embarrassed at the quality of some of the advice our industry is giving. We have inexperienced, undereducated advisors selling complex products. We have got to move from the broker-dealer model to the planning model,” he said.

His fellow panelists, Derek Bruton of LPL Financial and David Carroll of Wells Fargo, several times mentioned the weak financial literacy of most Americans. This was also borne out during a session dedicated to the voice of the consumer, where attendees could hear how little even high-net worth investors know about finance.

Indeed, the absence of bottom-up demand by the wider population for retirement income solutions may help explain many of the frustrations of the VA industry and of the decumulation industry (including income annuities, payout mutual funds, etc.) as a whole.

Despite the potential financial catastrophe that they face in retirement, like boaters unaware of the cataract they’re drifting toward, millions of Americans—both as individuals and as plan participants—aren’t actively demanding the kinds of solutions they will eventually need in the post DB (and perhaps post-Social Security) future.

That’s a big problem. Until more Americans (and their advisors) recognize their predicament, educate themselves, and start initiating the retirement income discussion, the retirement industry may have to keep guessing where to concentrate its efforts, and exactly what products and services it should offer.

The Bucket

Posted on October 21, 2010 by Editorial Staff -

Forty-Somethings Are Worried About Retirement: Allianz Life

Younger boomers in their 40s worry more about financial control and stability in retirement than older boomers, according to a survey of Americans aged 44-75 by Allianz Life Insurance Company of North America.

A majority (54%) of 44-49 year olds) reported feeling “totally unprepared” for retirement, and were more likely than older Boomers to say they needed to take more control of their financial future (47% to 35%). cent), to attain more certainty and financial security (41 % to 30%), and reduce their financial vulnerability (26% to 22%). Over eighty percent (84%) agreed that the safety of their money mattered more to them now than it had a few years ago.

“The economic downturn woke up many Americans to the challenges of securing retirement income, but this younger boomer segment seems to have taken the lesson even more seriously,” said Gary C. Bhojwani, president and CEO of Allianz Life. “Our Reclaiming the Future study told us that security and guarantees with retirement-income products are now very important to Americans.”

Only 19% of younger Boomers reported working with a financial planner, but 47% percent were receptive to working with one. Ninety-five percent of younger boomers said it was “important” or “extremely important” that their financial professional help protect a portion of their nest egg. A similar number (87%) want their financial professional to help them get guaranteed income in retirement.

Of younger Boomers who own an annuity, 83% were satisfied with their purchase, compared to 66% who were satisfied with their mutual funds, 63% satisfied with their stocks, 51% satisfied with U.S. savings bonds and 43% satisfied with certificates of deposit.

MetLife Asks, ‘What’s Your “Retirement Income Mindset?

MetLife has created an online tool to help consumers determine their “retirement income mindset.” Through the tool, the Retirement Income Selector, visitors to the firm’s website are asked a series of questions designed to elicit and reveal their attitudes towards traditional investments and guaranteed sources of income so they can pick the right retirement strategy.

“The Retirement Income Selector takes into account behavioral economic principles and acknowledges the unique personal, and sometimes, emotionally driven factors that influence the decision many of us make around retirement income needs,” said Julia Lennox, vice president, Retirement Products, MetLife, in a release.

The heuristic tool guides investors through nine questions about their attitudes toward longevity, liquidity and market volatility. At the end of the questionnaire, users are told their “income mindset.”

Each income mindset suggests the balance between guaranteed and risky products that’s probably right for each person. There are five income mindsets that indicate a range of risk appetite and a range of receptivity to guaranteed products, from no guarantees to full annuitization.

Nationwide Adds Flexibility to SPIA

Nationwide Financial Services, Inc. now gives owners of its INCOME Promise single premium immediate annuity the option to take lump-sum withdrawals if they need cash for an emergency. But there are restrictions and penalties.

New contract options include:

Owners of term-certain or installment refund payment versions of INCOME Promise can take lump-sum withdrawals after payments begin if they pay a fee.

A joint-life as well as single-life payout option is now available.

A 1-3% COLA is available but will reduce the initial income amount.

Nationwide said that a survey it sponsored by the Oechsli Institute found that 76% of affluent investors expect their advisor to provide them with guaranteed income in retirement.

Prudential’s Global Outlook for Q4 2010

In the October 2010 edition of his Global Investment Strategy newsletter, John Praveen, chief investment strategist for Prudential International Investments, predicts that 2010 equity rally will continue toward the end of the year.

“A new round of monetary stimulus should support the flagging recovery, while providing additional liquidity for financial markets. In addition, the earnings outlook remains solid while valuations remain attractive giving scope for multiple expansion,” Praveen wrote.

In other forecasts:

Global macro uncertainties continue to ease with a fresh round of monetary stimulus. “These reflation measures should ease fears of double-dip and deflation, while providing additional liquidity for financial markets.”

While growth momentum remains weak in the developed economies, Q3 GDP is expected to rebound in the U.S. and Japan after the weak Q2.

Eurozone & U.K. expected to slow in Q3 after the Q2 rebound. GDP growth remains solid in the emerging economies. The earnings outlook for the second half of 2010 in the major markets remains solid although slower than the strong pace in the first half.

Equity valuations remain attractive, which combined with low interest rates are likely to lead to multiple expansion in coming months.

The U.S. mid-term election cycle is positive for stocks as historically the U.S. equity market posted solid gains following mid-term elections.

Bond yields are likely to remain supported by the second round of asset purchases by the Bank of Japan and the Fed (expected in November).

GDP growth in the developed economies remains below trend in the first half and inflation remains uncomfortably low. However, a double-dip is increasingly unlikely in 2010 with growth expected to improve in Q3 & Q4.

Deflation is not a risk in the near-term and prices are unlikely to remain depressed if central banks keep the spigot of monetary stimulus open well into 2011.

Stocks still remain attractive relative to bonds with P/E ratios depressed and bond yields low. Among global stock markets, Praveen remains overweight in emerging markets and Eurozone; among global sectors, it is overweight on industrials and information technology; it remains underweight in healthcare, telecom, and utilities.

Among global government bond markets, Praveen remains overweight in emerging markets and U.S. Treasuries and underweight in U.K. gilts.

Genworth Financial Acquires Wealth Management Firm

Genworth Financial, Inc., has agreed to acquire the Altegris companies, which manages $2 billion in hedge funds and managed futures products and provides clearing services, for $35 million at closing and future payments contingent on performance. The deal is expected to close at the end of the year.

The move enhances Genworth’s presence in the competitive high-net worth client market by giving it a new suite of investment products and new relationships with registered investment advisors and broker-dealers. Together, Genworth Financial Wealth Management (GFWM) and Altegris will manage approximately $23 billion.

“The addition of Altegris will provide independent financial advisors an expanded set of offerings that are integral to serving the needs of their clients,” said Gurinder Ahluwalia, President & CEO of GFWM.

Males, Females Think Differently about Retirement: Ameriprise

AARP Launches Retirement Calculator

AXA Equitable Airs Third ‘Retirement Reality Show’ Episode

IRI and RegEd to Launch NAIC Required Annuity Training Platform

$10,000 Awaits Collegians with Best Retirement Essay, Video

Genworth Financial Acquires Wealth Management Firm

Data Connection