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BlogsThe Product Guru

Are All These Retirement Products Necessary?

By Lee Conrad
March 31, 2011
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For this installment of Product Guru, I’d like to turn things over to you, the readers. I’d like to hear about your retirement/product concerns directly.

First, a little background. At our most recent retirement roundtable last year, one of the panelists made the comment that advisors already have all the necessary financial products they need. They have all the components at their disposal, which, put together the right way can achieve almost anything a client needs. What’s lacking, he said, were enough good modeling tools, especially those that incorporate client accountability into the equation. That is, clients set up a plan based on the fact that they will spend, say, $10,000 per month, and then when they really spend $15,000, they often blame the fact that their product choice it too limited.

I think about that every time I receive a press release or announcement of the latest new product for retirement. And there have been a lot of them. Manufacturers, after all, are paid to produce, regardless of the opinion of a panelist on an industry roundtable.

Most of the products are designed for the drawdown phase obviously. One of the most recent examples, which we wrote about already, comes from Putnam. It announced a new suite of income-oriented funds specifically designed for retirement. This one used absolute-return funds that focus on returns over a three-year period with less volatility than similar, traditional asset classes. There have been others, as well, and diversification, less volatility and lower correlation are the big objectives in most of these new products.

In fact, diversification through alternative investing was the theme of the day at a recent media luncheon at Genworth Financial Wealth Management. The main idea was that as traditional asset classes have become more closely correlated over the years, true diversification has become harder to achieve. Then there is the possibility to invest in volatility itself. As I wrote last week in this space, the Chicago Board Options Exchange has worked to expand volatility-based investing, or, specifically, the use of its VIX method of measuring volatility.

So there are more choices than ever. But still, I wonder, was our panelist right? Are these new products largely unnecessary? And if so, is your clients’ biggest challenge the fact that they don’t stay within a pre-determined spending plan? Here is where I’d like to turn things over to you. Please leave your thoughts below on these issues.

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ûAs Group Managing Editor of SourceMedia's Investment Advisor Group, Lee oversees all editorial aspects of our Bank Investment Consultant brand. He has spent half his 20-year journalism career at SourceMedia and legacy companies. Before taking over BIC in April 2011, he spent more than three years as managing editor of On Wall Street. And before that he was a senior editor at U.S. Banker magazine for four years. He also worked as an editor in the newsletter unit of legacy divisions of the company for three years, covering various aspects of the fixed-income markets.

ûLee started his career as a reporter at the St. Louis Business Journal after graduating from the University of Missouri with a B.S. in economics. He is currently working toward an MBA at Baruch College, part of City University of New York.

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