PLANADVISER - November/December 2018 - 10

practice development
Retirement
Income
Options
F
rom his seat on the Institutional
Retirement Income Council (IRIC),
John Pickett sees what he calls " the
next frontier of the DC [defined contribution]
business " : systematic distribution
for participants from the retirement
plan. And, as with automatic plan
design, advisers are in a key position to
urge plan sponsors to embrace it.
The industry has realized that using
" auto " features to solve for employees'
inertia and investment fears, then
" saying, 'Where do we send your IRA
[individual
retirement account]
over?' doesn't quite make sense, " says
Pickett, also a senior vice president
with CAPTRUST in Dallas.
He says advisers who have yet to " sit
down with their plan sponsor clients
and say, 'Let's look at the distribution
options,' " should do so.
There are a growing number of
can suggest:
strategies
guaranteed
an adviser
minimum
withdrawal
benefits (GMWBs), various annuity
products, managed payout services-
even an institutional platform offering
competing providers' annuities in the
form of IRAs-among others. Advisers
should be well-versed in each, he says.
A good place to start is with a
managed account provision, to let nearretirees
customize their holdings from
their target-date fund (TDF), he says.
Financial Engines or Morningstar, for
instance, will still manage an owner's
account once he has retired, plus help
him with the drawdown, Pickett says.
Another benefit: Though sponsors typically
supply just one drawdown option,
by offering a managed account besides,
they effectively offer two, he says.
A procedure many plans now allow is
taking systematic withdrawals-which
keeps the retiree's money in the plan,
potentially to grow. Most recordkeepers
will make these periodic payments and
do not charge a fee, he says.
As to products, sponsors can choose
from a range of annuities, with the
payout being guaranteed or nonguaranteed,
immediate or deferred, variable
or fixed-or a combination of the
above-and may include the spouse.
" Everything has its trade-off, " says
Doug McIntosh, vice president, full
service investments, at Prudential
Retirement in Hartford, Connecticut,
as to which insurance product can
work best. In all of them, participants
lose control of their assets-a major
participant concern, he says.
Plan sponsors are known to have
concerns, too, including their lack of
a safe harbor when selecting these
products or a product's non-portability
when its owner changes jobs, he says.
The GMWB, an annuity-type
product, addresses some of these issues
by letting participants withdraw their
assets penalty-free. It works well within
or coupled with a plan's qualified default
investment alternative (QDIA), he says.
" It's a vehicle that's easily understood
and gives participants a maximum
amount of flexibility. "
Annuities have no explicit fees, he
says. Those are " effectively taken care
of by the pay-out ratio offered by the
underwriter. " GWMBs, valued daily,
have an underlying asset management
fee, which varies based on the
management-whether it is an index
fund or balanced portfolio, he says.
Fees for the investments range from 20
to 60 basis points (bps); on top of that
asset management fee, the guarantee
fee is about 90 to 100 bps, he says.
While an adviser can make revenue
off some of the insurance products,
says Pickett, the main value in offering
lifetime income strategies, in general,
is competitive. " Advisers can say, 'I
know more than just recordkeepers
and mutual funds. I can help you make
this decumulation strategy.' "
-Karen Wittwer
For more information, see " LIMRA Study
Shows Interest in Annuities " (November
21) and " How to Organize Sustainable
Retirement Distributions " (September 5) on
planadviser.com.
roll10
| planadviser.com November-December 2018 Art by JooHee Yoon

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PLANADVISER - November/December 2018

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