Data & Research September 27, 2016

LIMRA Releases Adviser Insights on Guaranteed Income Products

A survey of more than 1,000 financial professionals elicited mixed opinions on the effectiveness and reliability of guaranteed income products such as annuities.
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In times of economic uncertainty and market volatility, guaranteed income products such as annuities can provide investors with peace of mind. However, financial professionals including advisers have varying views on who should invest in these products and with how much of their assets.

According to a recent study by the LIMRA Secure Retirement Institute, more than 70% of advisers say affluent investors with $100,000 to $499,000 in assets; and mass-affluent clients with assets worth between $500,000 and $999,000 are the most suitable client base for guaranteed income products. The study also found that three in 10 advisers with clients having an average of $1 million in assets believe these investors could also benefit from guaranteed income products.

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As for how much should be invested in these products, the answer varied greatly depending on the type of adviser and the segment of the market being surveyed. On average, LIMRA found that advisers recommended just under one third of clients’ assets should be used to buy a guaranteed income product. While nine in 10 advisers agree guaranteed income products provide their clients with peace of mind, 40 percent of advisers say these products compromise their ability to properly manage their clients’ portfolio. Thirty-percent believe the products are too complicated.

These findings are from What Do Advisors Think About Retirement Income Planning, which is available to LIMRA members.

Products September 27, 2016

Betterment Reveals Tax-Coordinated Portfolios

The new product automates the process of optimizing asset location to boost an investor's cumulative after-tax returns.
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Automated investment advice provider Betterment has launched a new adviser tool that helps investors consider how to best allocate savings/investments across taxable, tax-deferred and tax-exempt accounts.

Choosing wisely how one allocates assets among these account types can significantly improve the after-tax value of savings, Betterment explains. To this end, the Tax-Coordinated Portfolio product helps investors manage multiple accounts as a single portfolio, “placing less tax-efficient investments into more favorably taxed accounts.”

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Betterment says its own research shows that in one generalized scenario, saving wisely in all three types of accounts improved the end-value of savings by as much as 15% over 30 years. (Also see, “Taxes Often a Surprise Expense in Retirement.”)

“Asset location is the closest thing there is to a free lunch in wealth creation,” states Boris Khentov, vice president of operations and a tax attorney at Betterment. “Customers saving for retirement in more than one type of account should be using it to increase their after-tax returns. However, doing it properly is a complex, mathematically rigorous, and continuous process.”

The goal for Betterment’s Tax-Coordinated Portfolio is to “automate this sophisticated strategy every step of the way, helping our customers make the most of their investments.”

More information on Betterment and the firm’s entrance into the employer-sponsored retirement plans marketplace is available here.  

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