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Securities America, Wealth2K Help Advisors Fight “Big Brands”

Posted on August 12, 2009 by Editor Test -

Omaha-based Securities America, a network of 1,900 advisors, and Wealth2K, the Massachusetts-based multi-media company, have released “Retirement Time,” a web-based retirement risk assessment tool designed to help the firm’s financial advisors seize the burgeoning retirement income opportunity-and hinder “big brand” intruders from poaching their client base.

Retirement Time builds on one of the capabilities of a Wealth2K product called The Income for Life Model, which uses a refined “bucket system” to provide income in retirement and which is an element of Securities America’s NextPhase Income Distribution System, which supports advisors.

“To attract more investors to their retirement products and services, advisors must introduce high-end, high-impact communications tools that convey rich and motivational educational experiences,” said David Macchia said, founder and CEO of Massachusetts-based Wealth2K.

Advisors tend to think of other independent advisors as their closest competitors. But Macchia cautioned that “big brands” such as Charles Schwab, Fidelity, and Ameritrade, which have large budgets, sophisticated technology and market directly to individual investors, may represent as large a threat.

“The big brands are targeting advisors’ clients, and they are using impressive, web-based communications technology to express the value of their products and services. Advisors who fail to recognize and manage this competitive threat do so at their peril,” Macchia said.

“The arbiter of an advisor’s success in the retirement markets will be how well he or she is able to communicate to a large and fluid universe of prospective clients,” said Paul Lofties, first vice president of acquisitions and wealth management at Securities America, Inc., whose advisors manage more than $34 billion.

Retirement Time offers consumers calculators and other tools including Seminar for One technology designed to help them anticipate their needs in retirement. It also provides educational videos such as The Power of an IRA Rollover and IRA Rollover Options to Consider.

The Seminar-for-One also provides a comprehensive look at retirement needs and the funding model offered by The Income for Life Model. Advisors who use the platform link to it directly from their own website and can customize it with their name and contact information.

Prudential Net Income Turns Positive in 2Q 2009

Posted on August 12, 2009 by Editor Test -

Buoyed by the steady market recovery since the end of March, the Financial Services Businesses of Prudential Financial Inc. reported net income of $538 million for the second quarter of 2009, compared to $566 million for the year-ago quarter.

The income nearly offset a first quarter loss, bringing the company’s first-half net income to $533 million.

Individual annuity sales boomed in the second quarter, as Prudential saw a wave of exchanges of variable annuity contracts from insurers perceived as less financial strong, as well as a drop in surrenders and withdrawals from VA contracts with “in the money” lifetime income guarantees.

Gross annuity sales reached a record $3.4 billion in the quarter, up from $2.8 billion last year. Net sales were $2.06 billion, up from $518 million a year ago.

“Our current quarter results reflect improvements in financial markets, together with our strengthening competitive position. Sales and net flows were solid across the board in the second quarter and first half. Variable annuity sales and flows, and individual life sales, were especially strong this quarter,” said chairman and CEO John Strangfeld.

Annuity-related fee income was not as robust as a year ago, however, thanks to lower account values. The individual annuities segment reported a year-over-year increase in adjusted operating income (to $432 million, from $154 million) if certain benefits related to rising customer account values in the second quarter are considered. But there was a year-over-year income decline of $79 million if those benefits are excluded, according to company figures.

Prudential’s full-service retirement business experienced gross deposits and sales of $3.9 billion and net additions of $87 million, compared to gross deposits and sales of $4.5 billion and net additions of $164 million a year ago.

Comment: The High Price of Low Rates

Posted on August 12, 2009 by Kerry Pechter -

If all goes as expected, Fed chairman Ben Bernanke will announce today that the Fed funds rate—the cost of overnight loans between banks—will remain at 0.25% for the foreseeable future.

In fact, some bank analysts predict that the Fed funds rate will remain close to zero until the second half of 2010.

Is that good news? It depends on your point of view. If you want to borrow money or invest in the stock market, it’s probably good news. If you’re a retired person who wants to eke out an inflation-adjusted return on a safe investment like a CD, it’s not such good news. It’s more like grand theft.

Low rates are a tax on retirees and anyone else who saves. Douglas W. Diamond, an economist at the University of Chicago Booth School of Business, told RIJ, “This is a transfer to the people who borrow, and a tax on the people who want to invest.” As he put it in a paper written with colleague Raghuram G. Rajan for the National Bureau of Economic Research:

“A number of households do not participate in the financial system. Interventions ‘work’ by effectively taxing them more heavily, and offering the proceeds to participants in the financial system, whose preferences set interest rates.

“Note that the interventions that we are referring to could well be thought of as monetary policy interventions that are not targeted at specific banks, and are meant to bring down the real interest rate. To have effect, they must ‘penalize’ one set of households—those who do not participate as strongly in financial markets—in order to benefit the system.” (NBER Working Paper No. 15197, July 2009).

“The government can always violate property rights and keep the banking system intact—for instance, by taxing households and gifting the proceeds to banks (or equivalently, lending to banks at rates the private market would not lend at). This sort of directed bailout would reduce household consumption while limiting project termination … Such interventions may be necessary in extremis (and is taking place even as we write).”

In another NBER Working Paper, 15138, entitled “Collective Moral Hazard, Maturity Mismatch, and Systemic Bailouts,” Emmanuel Farhi of Harvard and Jean Tirole of France’s Institut d’Economie Industrielle write:

“A low-interest-rate policy involves both an implicit subsidy from consumers to banks (the lower yield on savings transfers resources from consumers to borrowing institutions and is an invisible subsidy to the latter).” A 1% interest rate cuts the cost of capital by 75% relative to a 4% rate and can keep a number of highly mismatched institutions afloat.”

A low rate policy also creates moral hazard. When the Fed lowers interest rates to resolve a crisis, as it did in 2001 and 2007, it creates the expectation among bankers that it will lower rates during the next crisis. Bankers feel free to take big risks by investing in illiquid assets, like mortgage-backed securities. Diamond suggests a deterrent to that.

“The only way to deter the banks from choosing too much leverage and too much liquidity during low rate environments is to make them less profitable in normal rate environments by raising rates higher than you normally would, but not so high as a to destabilize the economy,” he told RIJ. He also suggested higher capital requirements during the time that rates are low to reduce the temptation to over-leverage.

Any central bank would eventually be forced to do that, Farhi and Tirole suggest in their paper, or see its reputation suffer. “Yet another cost of bailouts is the loss of reputation by the central bank. This could be modeled by introducing a tough type and soft type,” they write.

“A big bailout would then reveal the type of the central bank to be soft, raising the likelihood of future bailouts and pushing banks to take on more risk, hoard less liquidity and lever up, resulting in increased economy-wide maturity mismatch and in turn larger bailouts.

“Even a central bank of the soft type would internalize these reputational costs and be more reluctant to engage in a bailout in the first place. Similarly the tough type will try to separate itself from the soft type by taking a hard line.”

To paraphrase the Fed chairman’s own recent comment, “When the elephants fight, the grass suffers.” Retirement-bound Boomers are paying for this crisis. They paid when their 401k balances fell, they paid in lost wages when their jobs vanished, and they continue to pay by earning less on safe investments.

Their consolation may be the unemployment benefit extensions, the COBRA subsidies, the infrastructure projects, and the Cash-for-Clunkers program that the Obama administration—in the face of intense criticism—has parceled out. But, in a real sense, they paid, and continue to pay, for whatever they’re getting.

2009 Oustanding Consumer Credit

Posted on August 12, 2009 by Editor Test -

2009 Oustanding¹ Consumer Credit
	Q1	Mar	Apr	May²
Percent change at annual rate³
Total	-3.5	-7.3	-7.8	-1.5
Revolving	-8.9	-10.2	-11.1	-3.7
Nonrevolving⁴	-0.3	-5.6	-5.9	-0.3
Amount: billions of dollars
Total	2539.4	2539.4	2522.9	2519.6
Revolving	939.6	939.6	930.9	928.0
Nonrevolving⁵	1599.8	1599.8	1592.0	1591.6
¹ Covers most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate. ² Preliminary ³ The series for consumer credit outstanding and its components may contain breaks that result from discontinuities in source data. Percent changes are adjusted to exclude the effect of such breaks. In addition percent changes are at a simple annual rate and are calculated from unrounded data. ⁴Includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations. These loans may be secured or unsecured.
Source: Federal Reserve Statistical Release

Banks Reap Record Annuity Income

Posted on August 12, 2009 by Editor Test -

Bank holding companies (BHCs) earned a record $734.5 million in commissions and fees from annuity sales in the first quarter of 2009, a 12.4% increase from $653.3 million in first quarter 2008, according to the Michael White-ABIA Bank Annuity Fee Income Report released in late July. First-quarter annuity commissions were also 12.1% greater than the $655.2 million earned in fourth quarter 2008.

Wells Fargo & Company (CA) ($177 million), Bank of America Corporation (NC) ($111 million), and JPMorgan Chase & Co. (NY) ($90 million) led all bank holding companies in annuity commission income in first quarter 2009. Wells Fargo is the largest broker-dealer in the United States, with about 21,000 advisors. Bank of America has about 18,000 advisors.

All three firms completed major acquisitions before or during the first quarter. Wells Fargo bought Wachovia Bank-which in recent years was the breakaway leader in annuity sales in the bank channel-Bank of America bought Merrill Lynch, and JP Morgan Chase bought Bear Stearns.

These three mega-banks truly dominated bank annuity sales. Their $378 million in annuity commissions was well over half of the $697.1 million in earned in annuity commissions by BHCs with over $10 billion in assets in the first quarter, and more than half the $734.5 million in annuity commissions reported by all 381 (out of a total of 940) large BHCs that reported annuity sales.

Fixed annuity sales were behind the record earnings. Sales of fixed products shot up in the first quarter of 2009 because the steep yield curve allowed fixed annuity issuers to offer much more competitive rates than CD issuers, who conform to short-term rates. New York Life’s Fixed Annuity, a book-value product, was the top-seller in the bank channel in the first quarter. Book value fixed annuities pay a declared rate of interest for a specific period.

Only a fraction of bank income from sales of investment and insurance products comes from annuity sales. The $734.5 million in annuity commissions and fees constituted 15.7% of banks’ total mutual fund and annuity income of $4.67 billion and 19.5% of total BHC insurance sales volume (i.e., the sum of annuity and insurance brokerage income) of $3.76 billion.

Annuity sales leaders among mid-sized BHCs (with assets between $1 billion and $10 billion) included Stifel Financial Corp. (MO), Hancock Holding Company (MS), and NewAlliance Bancshares, Inc. (CT). Among BHCs with assets between $500 million and $1 billion, leaders were Van Diest Investment Company, Codorus Valley Bancorp, Inc. (PA), and First Citizens Bancshares, Inc. (TN).

Compiled by Michael White Associates (MWA) and sponsored by American Bankers Insurance Association (ABIA), the report measures and benchmarks the banking industry’s performance in generating annuity fee income. It is based on data from all 7,447 commercial and FDIC-supervised banks and 940 large top-tier bank holding companies operating on March 31, 2009.

One-Stop Shopping for Retirement Risk

Posted on August 12, 2009 by Editor Test -

Many entrepreneurs are trying to surf the Great American Age Wave, but few have been as closely involved with selling financial products to “seniors”—there’s got to be another word—for as long as Steve Zaleznick has.

Four years ago, the long-time AARP executive started Longevity Alliance, Inc., a private equity-backed, Internet-based insurance product marketing organization that he cobbled together from two early web platforms, Insurance Quote Services and Long-Term Care Quote.

Operating out of headquarters in Washington, D.C. and a call center in the Phoenix suburb of Gilbert, Arizona, Zaleznick and his venture capital backers hope that increasing numbers of aging Boomers will buy immediate annuities, Medicare enhancements, and long-term care insurance (LTCI) from his low-pressure, salaried agents.

“We’re not just moving leads to other people,” Zaleznick told a skeptical inquirer who thought his multi-hued website looked suspiciously like many insurance sales-lead aggregation traps on the web that offer “free quotes” while trawling for names, addresses and phone numbers.

And despite the old saying that insurance is sold, not bought, he’s proving that there’s a viable web-mediated direct market for annuities and LTCI. “I like the idea that people can self-educate,” Zaleznick said. “Obviously, there’s a huge need for clarity and communication in this business.”

Ivy Leaguer goes to AARP
Zaleznick, who is 54, got involved with the senior market before it was cool. Some 25 years ago, he joined the then-American Association of Retired Persons as a young attorney. He had earned a BA in economics at Brown University, then gone on to get a JD degree from Georgetown University Law Center in Washington, D.C., where AARP is based.

After serving as general counsel, he founded and ran AARP Services, Inc., which acts as a marketing intermediary for AARP’s insurance, financial service, healthcare and lifestyle product partners. AARP has relationships with New York Life, The Hartford, Chase and other companies.

Zaleznick left AARP in 2002, but was still determined to do good and do well by marketing directly to older Americans. In 2005 he started his own company, Longevity Alliance Inc., and soon received backing from Kinderhook Industries, a private equity firm in Manhattan that represents $470 million in capital that was founded in 2003.

Longevity Alliance has been built on a foundation of two acquired businesses, both based in the Phoenix area. The first was Insurance Quote, an online insurance and annuities marketing site that was one of several businesses owned by entrepreneur David T. Phillips. That business survives in part as a term life insurance marketing website, iquote.com.

In September 2006, Zaleznick acquired Long-Term Care Quote (ltcq.com), a 10-year-old independent agency in Chandler, Arizona that specialized in direct sales of long-term care insurance, from Robert Davis. The deal included Long-Term Care Quote’s proprietary database and rating system for developing customized quotes and side-by-side comparisons for long-term care insurance.

“Our businesses are divided among long-term care insurance, retiree health insurance, and longevity insurance,” Zaleznick told RIJ. “The public doesn’t lack sufficient choice about these products. But it does lack navigational tools. Most people deal with their situation by not dealing with it. But, in all of these cases, it’s hard to transact without talking to someone.”

A retro look
At first glance, Longevity Alliance’s homepage appears similar to online insurance sites that exist as magnets for leads, which are often sold to commissioned agents who follow up with a high-pressure house call. The purple and orange color scheme is jarring, the photographs of smiling grey-haired couples a bit retro.

But the strategy here seems to be different. According to Tina Jones, the director of operations at Longevity Alliance’s call center in Gilbert, the leads go to one of the company’s phone representatives. While they are insurance licensed, they don’t work on commission.

“All of our agents are contracted and appointed to certain carriers, but as far as compensation goes, they’re salaried employees,” Jones said. “They assign their commissions to the corporation. The consumers out there appreciate that. Otherwise, it’s hard for them to know if the person recommending products is representing their best interests.”

“A lot of our agents come from a single carrier environment, and weren’t satisfied offering one choice. They have a desire to go home feeling like they helped people,” she added. “It’s not for everyone. If you have that aggressive sales mentality, you won’t be interested in our offering.”

About 40 agents work at the call center, along with about ten additional support staff, she said. According to the website, Longevity Alliance sells products issued by Assurant Health, Blue Cross/Blue Shield, CIGNA Medicare Services, Coventry Health Care, Mutual of Omaha, United Healthcare, Aetna, and American National.

Jones said Longevity Alliance also works with Midland National Life, Jackson National Life, Genworth Financial, John Hancock, Mass Mutual and others. Some of the sales are referred to Crump, the insurance marketing organization formerly known as BISYS.

Zaleznick is president and CEO of the company, and even writes a blog at longevitylens.com. Ken Gromacki, the director of sales operations, came to Longevity Alliance from ICMA Retirement Corporation. The chief marketing officer is Darren Gruendel, a Yale University graduate with an MBA from the Kellogg School of Management at Northwestern University. The chairman is Horace Deets, executive director of AARP from 1988 to 2001.

Longevity Alliance is clearly all business. But it evidently has ambitions that go beyond just pushing insurance products, as these thoughtful comments on its website suggest:

“Americans face three primary financial risk categories as they age: health care expense, long-term care expense, and the general risk of outliving one’s assets, ‘longevity risk.’ Each presents a unique problem to solve and each can derail an otherwise sound financial plan. Solving one is a start, but real ‘peace of mind’ can only come when all three have been addressed.”

The question is, can call center reps, even with insurance licensing and experience, create a comprehensive plan?

Lincoln Financial Group Rebounds in Second Quarter

Posted on August 5, 2009 by Editor Test -

Lincoln Financial Group, the subject of takeover rumors last March, fared better in the second quarter of 2009 than in the first quarter, with increased deposits and net flows in variable, fixed, and indexed annuities.

Compared to the second quarter of 2008, however, the Philadelphia-based company reported a net loss of $161 million versus net income of $125 million a year earlier. At $2.6 billion, overall annuity deposits were down 23% from the second quarter of 2008 but rebounded by 20% from the first quarter of 2009.

The current quarter reflected the year-over-year decline in the equity markets and included after-tax losses of $29 million on alternative investments, $170 million related to the sale of Lincoln National (UK) plc, and $109 million in realized investment losses, the company said in a release.

Among the second quarter highlights:

Consolidated net flows of $2.1 billion doubled versus the 2008 period and increased 8% sequentially, with stable retail deposits and improved lapse rates across all segments.
Issued $690 million of common equity and $500 million of senior debt and ended the quarter with holding company cash and cash equivalents of approximately $800 million.
Unrealized losses at the end of the quarter improved more than 40% sequentially, contributing to an overall increase of $1.8 billion in stockholders’ equity.
Completed expense reductions expected to yield run-rate savings $250 million, pre DAC and tax, by year-end 2009.

The individual annuities segment reported income from operations of $65 million in the second quarter of 2009 versus $116 million in the year-ago period, reflecting a $13.9 billion decline in average variable account balances compared to the prior year. The 2009 quarter included a loss on alternative investments of $5 million, after tax.

Gross annuity deposits were $2.6 billion, down 23% from the prior year but up 20% from the first quarter. Net flows were $1.0 billion versus $1.6 billion in the 2008 quarter, but more than doubled sequentially.

Variable annuity product deposits of $1.7 billion and net flows of $651 million were down 41% and 59% year-over-year, respectively, reflecting depressed economic and market conditions. Variable annuity product deposits and net flows increased 9% and 49%, respectively, from the first quarter.

Fixed and indexed annuity product deposits of $900 million were up 83% year-over-year and 49% sequentially, driving an improvement in net flows for both periods.

The defined contribution business reported income from operations of $28 million, versus $41 million for the same period a year ago, reflecting a $6.1 billion decline in average variable account balances compared to prior year.

Gross deposits of $1.2 billion were down 13% versus prior year. Total net flows increased 39% to $329 million compared to the year-ago quarter, reflecting continued strong persistency. Deposits and net flows were down sequentially, a result of normal seasonality in the first quarter.

MetLife Posts Strong Annuity Growth in 2Q 2009

Posted on August 5, 2009 by Editor Test -

MetLife reported second quarter 2009 operating earnings of $723 million and saw its U.S. annuity deposits increase 43% over second quarter 2008, to $5.5 billion. But the insurer lost $1.4 billion in the quarter, largely because of derivative losses.

“We had very strong deposits and positive net flows in our U.S. annuity business. Institutional’s top line grew 8% over the second quarter of 2008; and our International business continued to perform well.” said C. Robert Henrikson, chairman, president & chief executive officer of MetLife, Inc.

Total annuity deposits reached $5.5 billion as variable annuity deposits increased 27% to $4.5 billion and fixed annuity deposits grew from $277 million to $949 million. Annuity net flows remained positive for the fifth consecutive quarter while lapse rates declined for the second consecutive quarter.

In Japan, total annuity deposits were 137.8 billion yen ($1.3 billion), compared with 149.6 billion yen ($1.4 billion). A 45% increase in fixed annuity deposits was more than offset by a decline in variable annuity deposits, reflecting current market conditions.

Net investment income was $3.9 billion, up from $3.3 billion in the first quarter of 2009 but down from $4.3 billion in the second quarter of 2008. During the second quarter of 2009, variable investment income was lower than plan by $150 million, or $102 million ($0.12 per share) after income tax and the impact of deferred acquisition costs. The lower variable investment income was driven by negative returns from real estate funds as well as corporate joint ventures.

For the second quarter of 2009, the company had net realized investment losses, after income tax, of $2.6 billion, mostly driven by derivative losses of $1.8 billion, after income tax. The remainder were primarily due to credit-related losses and impairments across a broad range of asset classes, and were consistent with the company’s expectations.

MetLife Posts Strong Annuity Growth in 2Q 2009

Posted on August 5, 2009 by Editor Test -

MetLife reported second quarter 2009 operating earnings of $723 million, or $0.88 per share, and saw its U.S. annuity deposits increase 43% over second quarter 2008, to $5.5 billion. But the insurer lost $1.4 billion in the quarter, largely because of derivative losses.

Net investment income was $3.9 billion, up from $3.3 billion in the first quarter of 2009 but down from $4.3 billion in the second quarter of 2008. During the second quarter of 2009, variable investment income was lower than plan by $150 million, or $102 million ($0.12 per share), after income tax and the impact of deferred acquisition costs. The lower variable investment income was driven by negative returns from real estate funds as well as corporate joint ventures.

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VA Rider Hedging Has Been 94% Effective—Milliman

Posted on August 5, 2009 by Editor Test -

Milliman Inc., the Seattle-based independent consulting firm, has published a sequel to its December 2008 report on the state of the variable annuity business. In this July 2009 report, actuary Peter Sun finds that:

Based on Milliman’s study of VA writers with hedging programs, the hedging programs have been about 94% effective in achieving their designed goals during the November 2008 through March 2009 period.
Significant refinements and expansions of existing hedging programs have been explored and implemented. These changes enhance the earnings of VA writers through better management of basis mismatch, interest rate hedging strategy, volatility assumptions, and investment strategy of hedge assets.
The arms race in richness of product features has ceased as a result of the financial crisis. Simpler product designs with higher fees are becoming the new product trend.
There was a flurry of mergers and acquisitions (M&A) activities, with no successful transactions. That dynamic is bound to change. The financial crisis stands to weed out weaker players in the market, and leave stronger and bigger surviving VA writers with viable products and robust hedging programs.

Reinsurance and structured derivative solutions became less available again as a result of the financial crisis. This has prompted VA writers to reevaluate their entire risk management strategies to be more self-reliant.

Obesity Linked to Retirement Insecurity

Posted on August 5, 2009 by Editor Test -

A waist is a terrible thing to mind, they say. Now overweight people have another reason to feel guilty about the shape they’re in. A new study asserts that the obese need more medical care than slender people and drive up costs. One insurance executive even linked obesity to America’s retirement challenges.

“Obesity makes it more difficult to achieve financial security in retirement because it increases expenses and reduces the amount of savings available for retirement,” said Gregory Boyko, chairman of The Hartford’s Japanese life insurance subsidiary. At the Asia Society in New York City, he called for “private-public partnerships” to better educate populations about the need for retirement preparedness, including the “need to maintain good health well into old age.”

Just last week, the journal Health Affairs published a study by the Public Health Economics Program at RTI International in North Carolina showing that “the annual medical burden of obesity has risen to almost 10% of all medical spending and could amount to $147 billion per year in 2008.”

“Per capita medical spending for the obese is $1,429 higher per year, or roughly 42% higher, than for someone of normal weight,” the article said. “Obesity rates increased by 37% between 1998 and 2006 (from 18.3% to 25.1% of the population), which suggests that the increased prevalence of obesity is driving increases in total medical spending.”

The report cited other studies showing that obesity was responsible for 27% of the rise in inflation-adjusted health spending between 1987 and 2001. On the other hand, the New England Journal of Medicine reported in 2005 that accelerated mortality rates among the obese could reduce Americans’ average life expectancy by two to five years by 2050.

Some in the U.S. have objected that linking obesity and high health care costs represents “blame the victim” logic. But other countries are apparently already acting on this type of research. A law enacted in Japan in 2008 aims to reduce the number of obese people there by 10% by 2012 and by 25% by 2015.

Japanese employers and local governments whose employees fail to meet specific targets will face financial penalties. People between the ages of 40 and 74 must meet specific waistline standards, 33.5 inches for men and 35.4 inches for women.

‘Breakaway Broker’ Is A Myth

Posted on August 4, 2009 by Editor Test -

The exodus of advisors from wirehouses is real, but it’s not of Biblical proportions, according to Boston-based Cerulli Associates, which has just released its annual sizing of the advisor marketplace, with data on assets under management and advisor headcounts by channel for retail advisors.

“There’s this impression of lemmings leaving Merrill Lynch [for example] to go independent,” said Cerulli’s Bing Waldert. “While the trend is real, it’s happening slowly. If anything, it has decelerated slightly.”

The stronger trend, at least since the financial crisis gained momentum last year, has been for wirehouse advisors either to switch houses or accept incentives to stay put. Billions in controversial bonuses—often at companies receiving federal bailout money—have been paid mainly to retain top producers.

“Advisors are getting heavy compensation to stay in their current channel,” Waldert said. A third factor is that the “number of advisors has stayed flat or shrunk slightly in the last five years, so broker-dealers have stepped up recruiting packages. It’s a market share game right now.”

“Despite the discussion about the move toward the ‘indies,’ the wirehouses still have over 45% of the assets,” he added, or $3.95 trillion. “That’s eroding slowly, but Morgan Stanley Smith Barney alone, with $1.4 trillion under management, has more assets than either the entire RIA (registered investment advisor) or IBD (independent broker-dealer) channel.”

The 54,000 wirehouse advisors represent 18% of retail advisors. The largest group—the 98,000 advisors in the independent broker-dealer channel—represents about 31%, and manages about $1.35 trillion (16%), if dually-registered advisors are included. Dually-registered advisors have an independent RIA, but still maintain a broker-dealer affiliation for commission business.

The insurance broker-dealer channel has about 70,000 advisors, or 22% of the total headcount, but manages a disproportionately small share of the assets: only 3.4%, or about $238 billion, Cerulli reported. The bank broker-dealer channel has only five percent of the advisors and manages just 2.2% of the assets.

Last fall’s market crash dropped a bomb on advisors whose earnings are based on assets under management. Cerulli’s annual report shows that assets in all retail advisory channels fell from more than 26% in 2008, to $8.3 trillion from $11.2 trillion in 2007.

Assets by Channel, 2007-2008 ($ billions)
Channel	2007	2008	1-Year CAGR
Wirehouse	$5,458.6	$3,947.3	-27.7%
RIA	$1,106.7	$911.3	-17.6%
Including dually registered	$1,740.4	$1,360.4	-21.8%
IBD	$1,605.4	$1,182.8	-26.3%
Including dually registered	$1,809.0	$1,352.4	-25.2%
Regional B/D	$1,589.4	$1,149.2	-27.7%
Dually registered advisors	$837.4	$618.6	-26.1%
Insurance B/D	$417.4	$282.9	-32.2%
Bank B/D	$228.8	$181.9	-20.5%
Total	$11,243.5	$8,274.1	-26.4%
Sources: Cerulli Associates, Investment Company Institute, NAVA, VARDS, Strategic Insight/SIMFUND, Securities Industry and Financial Markets Association, Investment News, Financial Planning, Bank Insurance Market Research Group, National Regulatory Services, Standard and Poor’s Money Market Directories, The Institute of Management and Administration, Judy Diamond, Department of Labor, CFO, Pensions & Investments, Cerulli Associates, in partnership with the College for Financial Planning, Financial Planning Association, Financial Services Institute, Investment Management Consultants Association, and Morningstar.

Nationwide and MSSB Ink SALB Deal

Posted on August 4, 2009 by Editor Test -

Nationwide Life Insurance has inked a deal to add a guaranteed lifetime withdrawal benefit (GLWB) rider to certain unified managed accounts (UMAs) at Morgan Stanley Smith Barney (MSSB), the mega-brokerage formed as a joint venture by Morgan Stanley and Citigroup this year.

Select Retirement, as Nationwide’s GLWB is called, can be applied to assets in MSSB’s Select UMA, a product launched by Smith Barney in April 2008. All 18,444 of MSSB’s “global representatives” will be able to sell Select UMA with the rider when the two firm’s brokerage platforms are integrated.

The initial rider capacity will be $250 million, an MSSB spokesperson told RIJ, which suggests that this is a toe-in-the-water project for Morgan Stanley. MSSB manages $1.42 trillion, with $325 billion in fee-based accounts, according to Morgan Stanley’s second quarter earnings report. As of last March, $5.5 billion of that was in Select UMA accounts.

Mindful of industry-wide GLWB losses in the past year, Nationwide is managing risk by limiting the size of the book of business, capping equity allocations at 50%, reserving the right to raise rider fees, and counting all withdrawals during accumulation period against the guaranteed income base.

Marc Brookman, managing director, product development and management at MSSB, told RIJ that Smith Barney began researching an income option for managed accounts about three years ago and considered several insurance partners before choosing Nationwide.

“Nationwide was the one that wanted to build this with us,” he said. “They’d never done anything like this before. We were working on this before the Lockwood product came out”—a reference to the Phoenix Companies’ rider for Lockwood Advisors’ managed accounts that was launched at the end of 2007.

“This appeals to a majority of our money managers. A lot of advisors just don’t like annuities, but this is a very different sale from a VA,” Brookman said. With Select Retirement, “we’re not competing with annuities, we’re complementing annuities. We think we’ll run through the $250 million in the first six months,” he added, noting that York University retirement income expert Moshe Milevsky is helping MSSB give presentations about the rider to its brokers all over country.

Two for the price of one

Nationwide said it first spoke with Smith Barney about applying a so-called stand-alone living benefit (SALB) rider to wrap accounts in mid-2008. The deal has been no great secret. But the dimensions of the partnership grew substantially when beleaguered Citigroup, desperate for cash, sold 51% of Smith Barney to Morgan Stanley for $2.7 billion and created the MSSB joint venture.

Smith Barney had been ailing. It has suffered severe asset and advisor attrition, as advisors and brokers fled Citigroup, which needed $45 billion in Troubled Assets Relief Program (TARP) assets to survive. “Advisors are, now more than ever, looking for a stable [broker/dealer]. They’re not finding it at Smith Barney right now,” a recruiter told Registered Rep magazine last spring.

Morgan Stanley has had problems of its own. It disappointed analyst expectations in the second quarter with a $159 million loss on continuing operations—mainly because credit default spreads improved and because it paid back a $10 billion TARP loan. “[We] would have been solidly profitable this quarter if not for these two positive developments,” said chairman and CEO John J. Mack in a July 21 statement.

In any case, Nationwide now has a much bigger SALB partner than it initially bargained for. According to Cerulli Associates, MSSB suddenly ranks second among mega-brokerages, between Wells Fargo/Wachovia Securities, which had 21,073 brokerage reps, and Bank of America/Merrill Lynch, which had 17,978 at the end of 2008.

“We were going with a big dog as it was and this makes it a bigger dog in terms of how much they manage,” said Eric Henderson, senior vice president of the Individual Investments Group at Nationwide Financial. “The key was integrating the plumbing at Nationwide and Smith Barney. We told the advisors, ‘You can keep doing what you’re doing. But now you have the option of lifetime income.’

“Everything else is the same,” he added. “That’s key to the success of the venture. So far it’s been very well received. Smith Barney has been having meetings with large groups of advisors to roll this out. The reaction has been very positive. In general, the economic events of the last nine months have made people value guarantees more.”

A cap at 50% equities

Although Nationwide filed the rider with the SEC as a fixed income annuity, it’s actually a GLWB, Henderson said. The rider guarantees a 5% annual roll-up during accumulation and a 5% annual payout rate starting at age 65 (4% from ages 55 to 64). Purchasers must be ages 45 to 7. The minimum account value is $50,000. In contrast to past GLWB riders, any withdrawals from the account balance during accumulation—not just withdrawals in excess of the roll-up—proportionally reduce the guaranteed income base.

Because the managed account itself carries an advisory fee and fund management expenses, Nationwide earns only a rider fee on the deal, while MSSB charges wrap account and investment fees. The rider fee is currently 1.00% for one person and 1.30% for the spousal continuation option, but can rise as high as 1.45% for one person and 1.75% for two, according to the prospectus.

The equity exposure in the approved investment portfolios is capped at 50%. Managed account owners can choose among several “eligible portfolios,” including 0%, 25%, 40% or 50% equities. Nationwide reserves the right to limit the investment options further-or relax them.

“This is the deal today,” Henderson said. “If the market continues to get better, we can change it. What we’re going out with reflects where the market is right now.”

If the managed account value ever drops to $10,000 during the payout stage, the assets are applied to the purchase of a fixed income annuity that continues making payments to the managed account owner or to his or her beneficiaries until the assets are disbursed.

“We are dealing with a company that has significant managed account money and who was open and excited about doing something about this,” Henderson said. “[Nationwide and Smith Barney] had similar visions of the movement to fee-based advisory relationships. This was an opportunity to go with a big partner who sees the same thing we do.” “It’s based on Smith Barney’s underlying investments. We did not change any of them. We’re just wrapping our insurance around it.”

According to a report last spring from Strategic Insight, at the end of 2008, “the managed money industry had nearly $1.4 trillion in assets under management, with $389 billion of that in managed portfolios (investing in either mutual funds or ETFs)… there are around $700 billion of assets already in place that could have a guarantee added with no change in assets.”

Free planning tool for advisors

In another part of Nationwide’s retirement business, the company began offering a free income planning program called RetireSense to financial professionals. The program divides retirement into five segments, each invested differently and each earmarked to provide risk-free income for a five-year period during retirement.

RetireSense appears to be a variation of the time-honored “bucket method” of income planning, which has been formalized in products such as Wealth2k’s Income for Life Model, which uses six income/investment segments. “The development of RetireSense has been a three-year long process and we did extensive competitor analysis,” said Nationwide spokesman Jeff Whetzel.

“The strategy is customized for the client through the use of the R-IncomeAnalyzer, a proprietary investment analysis tool that runs simulations, calculates the amount of money suggested for each investment and performs a statistical analysis that presents the likelihood of meeting specific income needs in retirement if certain types of suggested investments are made,” Nationwide said in a release.

Rule 151A After the American Equity Decision: Not Only Isn’t It Dead; It Wasn’t Even Needed

Posted on August 4, 2009 by John L. Olsen -

Last week, the U.S. Court of Appeals for the 2^nd District decided American Equity Investment Life Insurance Co. et al. v. SEC. (No. 09-1021). For some observers, this was a “victory” for those who insist that fixed index annuities are not, and should not be considered, “securities,” subject to regulation by the SEC (which Rule 151A asserted).

It was not a victory. Rule 151A was not overturned. The Court remanded it to the SEC for “reconsideration,” solely because it found that the SEC had not given proper consideration to the rule’s effect on “efficiency, competition, and capital formation” in the annuity industry, as required by Sect. 2(b) of the Securities Act of 1933. The SEC is free to re-submit Rule 151A, provided it supplies a “Sect. 2(b) analysis” that satisfies the Court.

Most observers understand this. Curiously, however, few who have written about this case seem to have noticed that the SEC didn’t really need Rule 151A at all! If its goal was to declare that fixed index annuities are “securities,” subject to its authority, it’s had the authority to do so for more than two decades—in Rule 151.

Rule 151, which has been on the books for 23 years, and is clarified in SEC Release 33-6645 (May 29, 1986), offers a “safe harbor.” Contracts which meet its tests will be deemed to qualify for the Sect. 3(a)(8) exclusion of the Securities Act of 1933 and, thus, will not be “securities” (subject to SEC authority). Release 33-6645 includes the following:

After reviewing the comments, the Commission has determined that it would be appropriate to extend the rule to permit insurers to make limited use of index features in determining the excess interest rate, so long as the excess rate is not modified more frequently then once per year. The insurer, therefore, would be permitted to specify an index to which it will refer, no more often than annually, to determine the excess rate that it will guarantee under the contract for the next 12-month or longer period. Once determined, the rate of excess interest credited to a particular purchase payment or to the value accumulated under the contract must remain in effect for at least the one-year time period established by the rule.

In the author’s judgment, NO index annuity can pass that test, as ALL index annuities credit interest retrospectively. They can’t credit interest prospectively because the index performance on which interest will be based has not happened yet. But that won’t satisfy the test cited above, which clearly states that, to qualify for the Rule 151 “safe harbor,” an annuity must calculate “excess interest” (over and above the interest rate contractually guaranteed), declare that interest, and guarantee to credit that rate for at least “the next 12-month or longer period.” The operative word here is “next.”

Why, then, did the SEC feel the need to declare, in Rule 151A (over two decades later), that any annuity in which the “excess” interest credited will, “more likely than not,” exceed the guaranteed rate, will fail to meet the Rule 151 tests and will, therefore, be a “security”?

Why didn’t the SEC simply assert the “must calculate interest in advance” test and declare that all fixed index annuities fail it?

I don’t know for certain. I haven’t met anyone (yet) who does. But I can speculate. Is it possible that the SEC realized that a strict interpretation of the “calculate interest in advance” test would not only leave index annuities outside its safe harbor, but some non-indexed contracts as well?

The SEC developed that test because (as it said in Release 33-6645) it believed that retroactive interest declarations shift “investment risk” to the purchaser, and that vehicles that do that are more like “securities” than “insurance.” Might it have realized, belatedly, that checking accounts that pay interest based on fluctuating money market rates (and that do not guarantee the current rate for an entire year) work the same way, and that declaring those instruments to be “securities” would be going altogether too far?

Whatever its reasons, the SEC hasn’t asserted the 151 test (to this author’s knowledge). But now that 151A has been remanded to it for a reconsideration that will probably require considerable time, effort, and expense to do properly, might it now decide to do so?

I wouldn’t be at all surprised.

So, where’s that leave those who don’t want to have to satisfy SEC rules (whatever they’ll be)—and FINRA rules (whatever they’ll be)—in offering fixed index annuities to their clients?

It leaves us with a lot of work to do.

The task for those who oppose SEC regulation of index annuities is, in my opinion, not a firm resistance to a “reconsidered” Rule 151A, but an overturning of the 23-year-old Rule 151 (at least, to the extent of the interest rate crediting provision cited above). Congress might produce that result if HR 2733 or S 1389, or something similar, becomes law. But I won’t hold my breath waiting for that to happen.

John L. Olsen, CLU, ChFC, AEP, is a principal of Olsen Financial Group, St. Louis, and co-author with Michael E. Kitces of The Annuity Advisor (2^nd Ed., National Underwriter Co., 2009).

How to Walk Through Fire

Posted on August 4, 2009 by Kerry Pechter -

Since last fall’s market crash, you hear a lot about advisors who are struggling to repair their clients’ portfolios, their clients’ confidence in them, or their clients’ optimism about retiring on schedule. But not every advisor or client is singing the Wall Street blues.

Three advisors who, perhaps coincidentally, all live and work in the Western half of the U.S., say that most of their older clients feel cool and calm despite the firestorm around them. That’s because they’ve already established a retirement floor income that’s invulnerable to market volatility.

In Denver, for instance, Phil Lubinski’s clients who are within five years of retirement aren’t canceling any travel plans. That’s because Lubinski, who uses a version of the classic “bucket method” of investment management, has pre-funded their initial retirement years.

“I read all these articles about people who say, ‘I can’t afford to retire when I wanted to,’” Lubinski said recently. “I estimate that people need at least $175,000 of income over the first five years of retirement. Five years before retirement, I’ll carve off $146,000 and let it grow for five years at three percent. Then the next five years is covered.

“Some people will say, ‘Do I really want to give up five years of market returns on almost $150,000?’ I say, ‘What’s more important: the rate of return or the certainty of being able to retire on schedule? If you keep the money invested, you run the risk of not being able to retire.’ I advised one client to put $400,000 in a stable value fund before retirement. He said, ‘Are you nuts?’”

“It just seems obvious to me,” Lubinski added. “So few people or advisors have a strategy that looks ahead farther than 12 months. They’re not thinking long-term.”

When creating a retirement income plan, Lubinski sets up six “buckets” and divides the client’s investable assets among them. Generally, the first bucket is filled with cash equivalents and funds the first five years of retirement. The next bucket, typically in bonds, funds the next five. Each succeeding bucket starts with a smaller base and a higher risk profile. The sixth bucket funds living expenses from ages 90 to 95, if needed, or a bequest.

If the assets in each bucket grow at their historical rates, they will be converted to low-risk assets at “maturity.” If they don’t grow, the client adapts by spending less or perhaps borrowing from the last bucket. “It’s always possible that that year’s income won’t be as high as we thought it would be. On the other hand, if you hit your [appreciation] target early or if you can hit by going in at a lower risk level, that’s what we’ll do,” Lubinski said.

The misunderstood asset

Dean Barber, who runs an advisory firm in Lenexa, Kansas, specializes in clients who are about to retire or have already retired, including about 600 families with $700 million under management. “We deal with the ‘Millionaire Next Door’,” he said—folks who tend to err on the side of risk-aversion and frugality.

Perhaps because of his clients’ age and risk profile, Barber focuses on playing defense. “Our philosophy is to protect first and grow second,” he told RIJ. “In late 2007 and early 2008, we got extremely defensive. So our conservative portfolios were down only one percent, and our most aggressive was down 22%. We deployed a little more capital back into stocks in February of this year, and now we’re about 20% long in equities in our most conservative portfolio.”

Exploiting Social Security is the center of Barber’s retirement income philosophy. Unlike many retirees who might take Social Security benefits at 62 and protect other wealth, Barber’s clients take Social Security at age 70 and set aside no-risk assets as bridge income until then.

“Let’s say you want to replace Social Security for a few years. You take a piece of money and spend it down. You spend the IRA money. You use a money market account or a short-term bond fund, and you create a high probably of success. Sequence of returns risk disappears,” Barber told RIJ recently.

“Social Security is a misunderstood asset class,” he said. “You’d need almost $250,000 more in savings to equal what Social Security can do for you, with its increases over time. The amount of dollars left on the table by not incorporating Social Security as the main driver is shocking. But our industry gets paid to manage assets, so why would they tell you spend your money first?”

That reduces the pressure to assume market risk, so Barber can focus on addressing other risks in retirement. “There are so many more risks than market risks,” he said. “You have to ask yourself the question, what could possibly go wrong? There are taxes—that’s just around the corner. There’s inflation. There’s the premature death of a family member. Bad investments are just one potential problem.”

‘Situational awareness’

Larry Frank, a Rocklin, California, advisor, has a somewhat younger clientele who are just encountering income issues. As first reported in an earlier issue of RIJ, he combines a traditional 3% to 5% SWiP method for generating retirement income with a two-bucket system that segregates client assets into ready money and reserves.

As his clients have aged, Frank has gone through a personal evolution. “The first time I went through this kind of market, between 2000 to 2003, I was on the learning curve,” he said. “I believed the mantra that if you invest for the long term, you’ll come out fine. At the time, my clients were still accumulators.”

Frank dealt with the 2008-2009 market crisis mainly by responding early. Two years ago, spotting troubling economic signals, he stopped buying the market dips and backed away from equities, particularly for clients close to retirement.

“Starting in the middle of 2007, I began pulling back, to a moderate allocation of 60% to 80% stocks,” he said. “Because my over-55 group is more at risk of losing employment or having a health issue, I pulled them back to a balanced 50/50 allocation moderate allocation, and in April 2008 I pulled them back another notch, to 75% short-term bonds and 25% stocks. But the accumulators we didn’t change unless they insisted. They went down with the market and now they’re coming back with the market.”

“Other advisors claim that this is market timing,” he said. “But I’m not trying to predict anything. It’s all based on mathematical triggers.” For instance, if a decline in market values raises a client’s effective withdrawal rate high enough to substantially increase the client’s age-adjusted risk of running out of money, he’ll tweak the payout rate and, in some cases, halt the flow of money from the long-term bucket to the short-term bucket.

At the same time, he’ll study economic indicators and Federal Reserve policy to determine whether the fluctuations are likely to be market noise or a fundamental market shift. “You have to do it with the grey matter,” said Frank, who described his system in the Journal of Financial Planning last April. “In the military”—Frank flew helicopters and C-141 transports—“we called it developing ‘situational awareness.’”

Target-Date Funds ‘At a Crossroads,’ Cerulli Says

Posted on July 29, 2009 by Editor Test -

Has the target-date fund opportunity peaked for asset managers? According to a Cerulli Special Report, “Target-Date Funds: Still Viable?” there’s still opportunity. However, success hinges on shelf space, product design, regulation, and performance.

“We view the industry as being at a crossroads. More than 70% of asset managers feel that they have just begun to tap this opportunity, while a small but growing percentage think it has reached its peak. The top three fund managers currently control nearly 80% of target date fund assets,” says Cindy Zarker, lead analyst of the report.

The report explains that asset managers face a number of challenges in the short term and longer term. Some challenges, such as performance concerns, may soon begin to abate, reflecting a short-term reaction to the market and economic crisis, while others may plague asset managers indefinitely such as fee pressure, limited access to shelf space, and the challenge of balancing greater customization with scalability.

“We feel that asset managers will be well served to carefully assess the true opportunity against potential risks. Firms should ask themselves if they can gain critical mass without access to a recordkeeping platform. If they examine these tough questions, some may find that this is not the market for them, and fund consolidation becomes the logical option,” continues Zarker.

Nearly 70% of target-date fund portfolios have less than $100 million AUM, and most asset managers consider $100 million to $150 million to be the minimum level of assets for a mutual fund to be profitable.

“Target fund consolidation is needed—not because the product concept is flawed—but because target funds can be a distraction from higher potential initiatives. Hanging onto small, unprofitable funds can be a drag on an entire asset management organization consuming valuable resources from the legal department to marketing,” concludes Zarker.

Despite considerable challenges, asset managers believe that open architecture will ultimately take in this market, leading to sub-advisory opportunities. This shift, along with product innovation, will allow for meaningful asset gathering.

The Hartford Continues to Shed Jobs

Posted on July 29, 2009 by Editor Test -

The Hartford has cut nearly 270 jobs in its investment products division nationwide, reflecting a slowdown in variable annuity sales and the company’s decision to shrink the problematic business. The job cuts included a variety of functions, including wholesaling.

“Fewer than 20” of the layoffs were in Connecticut, said David Potter, a spokesman for Simsbury, CT-based Hartford Life, which is part of The Hartford Financial Services Group. The investment products division sells annuities, mutual funds and retirement plans.

“The reductions reflect the need to realign our expenses with the reduced volume of business that we have experienced in our investment products business, particularly variable annuities,” Potter said.

The Hartford had already cut 475 jobs in Connecticut since late 2008, according to the Hartford Courant. More layoffs at the company are expected. As of late June, The Hartford had roughly 12,000 Connecticut employees.

The company has been laying off employees as part of efforts to reduce annual expenses by $250 million a year by the end of this year. The Hartford, which has suffered heavy investment losses and problems in its variable annuity business, accepted $3.4 billion in federal bailout funds last month.

Nationwide Adds Annuity Option to Morgan Stanley UMAs

Posted on July 29, 2009 by Editor Test -

Morgan Stanley Smith Barney announced that it has launched Select Retirement, which adds an optional Nationwide Life Insurance fixed income annuity option to the Select unified management account program as a way to convert UMA assets to lifetime income.

“We expect that the ability to combine a UMA with access to guaranteed lifetime income will be viewed by our industry as an important step forward,” said James J. Tracy, Director of Consulting Group for Morgan Stanley Smith Barney.

Select Retirement creates an opportunity to offer clients income guarantees that were not previously available for UMAs that include separately managed accounts (SMAs).

“By teaming with Morgan Stanley Smith Barney, we’re able to draw upon the collective financial strength and experience of both firms to build an investment and income strategy that Financial Advisors can provide to help clients preparing for or in retirement,” said John Carter, president of Nationwide Financial Distributors, Inc.

Before and after activating Select Retirement, eligible investors can use Select UMA to help build assets. Select UMA provides a selection of diversified asset allocation strategies and the ability to construct portfolios with a mix of separately managed accounts, mutual funds and/or exchange-traded funds (ETFs).

“With Select UMA, investors receive the convenience and efficiencies of a single account that integrates asset allocation, product selection, account administration and performance reporting,” said Marc Brookman, Director of Product Development for Morgan Stanley Smith Barney. Investors also can benefit from the personal guidance of their Financial Advisor and the expertise of Morgan Stanley Smith Barney’s centralized asset allocation and manager research teams, he said.

“The ability to combine Select Retirement with Select UMA provides Financial Advisors with a powerful program for clients who seek to balance asset growth potential while at the same time eliminating the worst-case scenario of outliving their income,” said James J. Tracy. “This may prove to be an especially helpful strategy for near-retirees and retirees who are hesitant to return to the equities markets at this time.”

What Financial Advisors Worry About

Posted on July 29, 2009 by Editor Test -

What Financial Advisors Worry About
Rank
1	Client losses
2	Client anger
3	May have to postpone your own retirement
4	Have to sell less profitable products to make up income shortfall
5	Future of practice is in jeopardy
6	Decreased likelihood of selling your practice
Source: Brinker Barometer Results Highlights Second Quarter 2009, Brinker Capital

Black Swans: Are they Really Infrequent?

Posted on July 29, 2009 by Editor Test -

Black Swans: Are they Really Infrequent?
2007-9	Subprime / Credit / Global Financial Crisis
2001-2	Dot-com Bust, Sept 11 Attacks, Argentine Default
1998	LTCM and Russian Default
1997-8	Asian Financial Crisis
1994-5	Mexican Peso Crisis
1992-3	European Monetary System Crisis
1989-91	U.S. S&L and Latin American Debt Crises
1987	Black Monday
1982	Mexico Debt Default (leading to international debt crisis)
Source: “Defined Contributions: What’s Next,” PIMCO Institute

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