Page 23 - Investment Advisor December 2022/January 2023

income planning capabilities to meet the auto-enrolling into a retirement income cant faith and trust in financial profes-
emerging competitive pressures. solution. Millennials share a more favor- sionals to help them identify the right
able view than baby boomers (83% vs. opportunities. As such, living up to this
INCOME INTEREST 75%), along with those with incomes trust is a great opportunity and a great
Invesco’s survey suggests nearly nine in less than $100,000 (83%). obligation for fiduciary financial advi-
10 employees would be more likely to “We found that employees want sory professionals.
stay in their plan if it were able to gener- their employers to start the retirement “We heard time and again that
ate a regular income stream in retire- income conversation – specifically people want reliable income, but they
ment. At the same time, almost a third of on how to turn their DC plan savings also want flexibility and they want
participants were unaware that staying into an income stream in retirement,” transparent costs,” Jenkins says. “The
in the plan after retirement was even Jenkins says. “To ensure employees interest in flexibility is often tied to
possible today, highlighting the need for are not only prepared for retirement, fears about unexpected medical costs
improved communication. during retirement. People are
As Jenkins points out, “We heard time and again that afraid of what an emergency
nearly all (97%) employees could do to their outlook if
would view their employer people want reliable income, but they have too much money
favorably if they added invest- they also want flexibility and locked away.”
ment options to help gener- Jenkins says advisors will
ate retirement income. While they want transparent costs.” have to do a lot of education-
78% of employers surveyed al work in the coming years
say they have provided com- —Greg Jenkins to make sure their clients and
munications and/or education prospects understand that
about turning retirement savings into but provided with income throughout, annuity products are different from
a regular stream of income, only 38% it is crucial that employers look at a standard equity investments. They may
of employees remembered receiving range of tools and income solutions and include growth-oriented features, but
these types of communications. consider early, more frequent educa- there is also an insurance arrangement
Jenkins says this is a common prob- tional support to help employees have a and a guarantee being put into place, and
lem in the DC plan world, with inves- smooth transition.” clients must understand that these pro-
tors overlooking options that are already tection features come with a premium.
available to them and employers failing TAKEAWAYS “To us in the industry, it is obvious
to appreciate the tantamount impor- While the survey is nominally focused that if you want a guarantee on your
tance of strong communications and on retirement plan investors and income in the future you will need to
benefits education. employers, Jenkins says, the findings pay that guarantee premium. However,
Other findings show nearly all (94%) should also be of interest to wealth man- as we saw in our focus groups, this
employees view guaranteed lifetime agers and other financial professionals understanding is not necessarily obvi-
income as a good fit for them, while 84% not concentrating their business on DC ous to everyday investors,” Jenkins says.
believe that non-guaranteed monthly plans, if only because of the rollover “Many people told us they didn’t under-
income withdrawals are a good option market implications. stand why they would have to accept a
and 88% view favorably a split option “One more general finding that really marginally higher cost as a fair part of an
between guaranteed lifetime income and struck us in the data and in the focus income guarantee.”
non-guaranteed monthly withdrawals. group conversations is the fact that peo- To Jenkins, this is a “glass half empty
While retirement investors like the ple don’t really seem to care too much and glass half full kind of thing.” “We
concept of guaranteed income for life, about the technical details of how these need more education so people can
the idea of “locking it in” and not being solutions or products work under the understand the tradeoffs of security
able to make any changes, access larger hood,” Jenkins says. versus liquidity a little bit better — to
capital amounts if needed or control Of course, people want to under- understand what they are actually get-
how the money would be invested were stand the fees they are paying and to ting for the fees they pay.”
all commonly cited as key disadvantages. have a solid appreciation for the goals
A substantial majority of investors and features of the strategies in which John Manganaro is a senior retirement reporter
(80%) surveyed have a favorable view of they invest, but they also have signifi- and can be reached at [email protected].

DECEMBER 2022/JANUARY 2023 INVESTMENT ADVISOR 21