The expectation of a growing retirement income market opportunity is now well accepted throughout the financial services industry. Many, if not most, companies recognize that the older, healthier, longer-living, defined contribution-dependent American consumer will soon be facing a critical life decision: how to generate sufficient retirement income from accumulated assets. And these people need help.

At DSG, we are in a unique position to see the changing trends in this marketplace, as a result of our numerous research studies and consulting engagements with companies who have already made the decision to initiate retirement income programs. We have seen a clear upswing in the number of companies who are demonstrating serious interest in providing viable retirement income plans with appropriate advice and product solutions. Some recent indicators of this interest include:

• establishment of "retirement income specialists"
• web sites dedicated to retirement income planning
• development of retirement income models, using Monte Carlo simulation
• increasing numbers of published articles, industry meetings, and market research focused on retirement income issues
• companies restructuring parts of their organization to create more of a retirement income

In short, many companies have already made the strategic decision to put more emphasis on this growing, high-potential market, but now the key question becomes: how best to implement this strategy? While the answers to this question will vary somewhat for each company based on its own situation, capabilities, and perspectives, there are common requirements for a successful mplementation of strategy. This article outlines several key considerations for implementing a retirement income strategy based on our experiences with firms who have already started down this path. Companies that expect to become significant, successful players in the retirement income marketplace will likely need to include the following steps in their implementation process:

Create a viable, actionable implementation plan.
While we hesitate to suggest planning when you're ready for action, we've seen too many companies who mistakenly try to take the "ready—fire—aim" approach to this opportunity.

While broad strategy may be set, it is critical to take the time to think through the specific actions and resources needed for successful implementation of your strategy.

Some issues that should be addressed include:

• key marketing activities/programs and accountabilities
• re-design of marketing materials (with more of a retirement income focus)
• identifying and addressing consumer needs for advice and products
• training and motivating producers
• capturing 401(k) rollover assets (a major retirement income opportunity)

Select and motivate producers.
If your firm uses producers (a.k.a. agents, reps, planners, or advisors) for delivery of products and services, there are two facts that we know for certain: not all producers will be appropriate for this market, and nearly all those selected will need to be educated about the retirement income market and related consumer needs.

Include the following in your implementation efforts:

• select producers based on a clearly-defined profile and enlist them as "retirement income specialists"
• modify commission structures if they are acting as disincentives for income-oriented products
• educate producers and show them what they need to do in order to succeed with this market (as one example, seminar selling has been shown to be successful)

Provide solutions in response to retiree needs.
If your firm uses producers (a.k.a. agents, reps, Your ultimate customer in this market is the retiree (or someone near retirement), and these clients are looking for solutions and appropriate advice. Thus, implementing your retirement income strategy should also involve the following activities:

• identify and know your customer and their needs, either through market research or producer feedback
• provide your "retirement income specialists" with appropriate skills and tools to solve the consumer's problems
• add features or products that meet the needs of retirees
• offer income-oriented asset allocation and planning models (several companies have developed, or are developing, such models).

Get your firm's (internal) act together.
If your firm uses producers (a.k.a. agents, reps, Too often, we witness companies missing out on the substantial potential of this retirement income market because of internal disconnects within their enterprise (the "silo mentality"). Consider one simple example: most 401(k) rollover assets will eventually be converted into retirement income, yet few companies have the internal mechanisms in place to retain these assets via a retirement income-focus at the time of the rollover decision. Typically, an "institutional" unit focuses on acquiring blocks of 401(k) assets while another unit within the organization will focus on selling individual retirement income products. Unfortunately, in most organizations, there is no effective communication or coordination between these units. Unless companies can come to terms with this issue and develop corrective actions, it will be difficult for them to succeed in any meaningful way.

Next Steps
If your firm uses producers (a.k.a. agents, reps, If your firm has made the decision to implement a retirement income strategy, you will need to carefully address the issues discussed above. In summary, lay out your plan of action, then use the plan to ensure a coordinated approach that satisfies your company’s, your distribution system’s and your customer’s needs. Perhaps most importantly, act soon before you find yourself playing catch-up with your competition.

ADD TO MAIL LIST

©The Diversified Services Group, Inc., All rights reserved