Getting Advisers Comfortable With the Future of Retirement Planning

Adapting to a changing marketplace, with more personalization and through partnerships, is critical for advisers, Michael Garberich, director of analytics at LeafHouse Financial Advisors, said at the start of a 2022 LeafHouse National Retirement Symposium conversation about the past, present and future of retirement planning.

Mike Rosenberg, head of retirement investment solutions at First Eagle Investment Management, called for a new way to evaluate investments.

Addressing market volatility, Rosenberg admonished advisers not to rest when things are going well. “That’s the time to peek around the corner and see what’s coming,” he said. “There will be spats of volatility, so advisers need to be prepared. Creating an investment menu that works for participants is important.”

Rosenberg said he thinks the way investments have traditionally been evaluated is archaic. “One-, three- and five-year returns are not real measures of investment skill and capability,” he said. “That evaluation doesn’t do a service to participants, as we can see by the investment menus in most plans today.” Rosenberg added that it’s easy to sell a fund when the market is up, but when the market is down and the fund is down even more, most investment managers and advisers say, ’We’re going to wait and see.’ That’s kind of archaic.”

Rosenberg said investment managers and advisers should look at the intent of the investment—whether it is to beat its benchmark, to get as much alpha as cheaply as possible, etc. To protect participants’ assets, it’s important to take into account more than what has traditionally been evaluated. “Volatility is really important. Getting back to even more quickly and starting to compound wealth over time is the only thing that matters,” he said. “No participant says, ‘I want to beat the market,’ they say, ‘I want to accumulate enough assets to be able to retire.’ We need to find a way to measure that.”

Rosenberg added, “If that’s not how the investment policy statement says to evaluate investments, change it. The IPS should be reviewed regularly and updated, especially in times of volatility.”

Retirement Income Is the Focus of the Future

When it comes to retirement income planning, education is important but also experience is needed for participants to know how to handle volatility as they age, said Tina Sanchez, managing director at BlackRock. “I feel like once participants come out of this volatility, there will be many more conversations about income solutions,” she said.

Steve Dopp, national director, retirement at Lord Abbett, said the key to getting participants to use retirement income solutions is personalization.

“At BlackRock, we believe in a continuum of personalization,” Sanchez said. “That means [target-date funds] for the youngest investors, personalized TDF solutions for larger plan sponsors and co-manufactured solutions from different providers, especially in pooled plans to meet needs of different plan sponsors. Advisers should think about who to partner with down the road when it comes to personalization.”

One thing BlackRock has spent time on is the difference between genders, according to Sanchez. “We’ve launched a model for women, another step towards customization,” she said. “It’s not full advice; it’s a model that recognizes genders are different, behaviors are different, and women often have different career paths [than men].”

Rosenberg pointed out that the conversation about retirement income is not new. “The facts about aging demographics is not new, there are just some folks who punish innovators, and that needs to stop,” he said. “We need to encourage new products. There are some great products. There’s a spot for guaranteed income and a spot for a retirement tier—it’s not a one-size-fits-all solution.”

Dopp said personalization will also trigger more adoption of managed accounts, but adoption will start with larger firms. “Advisers need to partner with the innovators,” he said. “I’m building a team around entrepreneurs—people who think differently and can think about where we need to be in 10 years.”

A More Collaborative Future

Regarding partnerships and investment offerings, Dopp said, “I hate the moniker ‘[defined contribution investment only].’ We just need to be more forward-thinking about distribution across the industry.”

Todd Williams, vice president, consultant relations at American Century, said the firm has struggled with how to work with aggregator firms. It is dropping the DCIO label as well and assigning more specialists to a relationship, serving clients at all levels.

Williams noted that co-distribution is something American Century wasn’t doing two years ago. “Now we work with other asset managers to bring advisers solutions,” he said. “Partnering with others that have strengths in areas we don’t is really paying off.”

Dopp said it’s every vendor’s job to be a connective tissue to build strategic partnerships with advisers. “If we want real engagement, we can create strategies together,” he said. “We won’t be everything to everyone, but we want to be a lot to the folks we engage with.”

Advisers and providers need to solve for how to share information and become an industry network so decisions can be made more cleanly, Dopp said.

“Connections are incredibly important, and we need to understand that’s the path of least resistance to helping clients,” Rosenberg said. “We build investment menus that are multi-manager. There’s a slot for everyone. I think leveraging what we can all offer together is something advisers can do more of.”