Prudential's Marcks applies lessons from dad
Christine Marcks used lessons from her father's drugstore to help others navigate the confusion of retirement, like she did for dad
By Robert Steyer | January 7, 2013 12:01 am
Christine Marcks learned a lot about money and retirement planning from her father, when he owned a drugstore in South Hadley, Mass. He hired her “with the firm direction that I was to save three-fourths of what I was making,” said Ms. Marcks, who is president of Hartford, Conn.-based Prudential Retirement, part of Prudential Financial Inc. “He paid me minimum wage, which was a lot for a 13-year-old girl,” she explained. More important was his advice that the savings “was going to help finance a better life and a steady job and a steady income.”
Christine C. Marcks
- Current position: President, Prudential Retirement
- Assets: $251.6 billion (as of Sept. 30), all business lines, including defined contribution, defined benefit, payout annuity
- Employees: 2,470 overall
- Age: 57
- Education: B.A. degree from Assumption College, M.A. in economics from Georgetown University. Holds NASD series 7 and 24 licenses
- Personal: Married, 2 children
- Professional/community organizations: Serves on the boards of the YMCA of the USA, the Greater Hartford YMCA and the Hartford Youth Scholars Fund; trustee of Assumption College; member of the board of directors for the Connecticut Business & Industry Association; board member of the Employee Benefit Research Institute.
Ms. Marcks has been president of Prudential Retirement since August 2007, having previously held executive jobs in the retirement and annuity businesses at ING Group and at Aetna Inc. However, the retirement industry is a long way from her early goal, which was fueled by taking French in third grade, adding Spanish in ninth grade, studying Russian in college and becoming a foreign affairs major. “I wanted to see the world,” she said. But an internship for her congressman during her senior year at college attracted her to Washington, where she studied international economics at Georgetown University and then worked for the Treasury Department for seven years on issues ranging from annual economic summits to negotiations with Japan on opening its capital markets to U.S. banks and securities firms.
When Aetna was searching for someone to work on global investing within pension plans, her international economics and finance background paid off. “My timing was good,” she said. “I got hooked on the investment and retirement part of the business.”
Aetna also provided her first business management opportunity, running a payout annuity business. “I got my initiation into what regular income means to an individual,” said Ms. Marcks, who periodically accompanied Aetna sales representatives to enrollment meetings at schools in Fairfax, Va.
Those sales-call conversations prompted her to check on her father's retirement planning. “I started talking to him about retirement — he was in his 50s at the time — and he realized he wasn't really set up,” she said. “He's got Social Security, a little bit of personal savings and five children whom he sent through college. That's his retirement plan,” she added. “He's going to be OK. But not everybody has five children. And therein lies the risk we face with pensions going away — not really putting the whole system together on the defined contribution side.”
Why are in-plan retirement income solutions still relatively rare? This is not a mature market. A lot of that is driven by the lack of a fiduciary safe harbor for this kind of an option. We (the retirement industry) have had ongoing conversations with the (Department of Labor) and, to a lesser extent, (the) Treasury (Department), about what the obstacles are to having these options included in the plans. By far, the No. 1 obstacle is the plan sponsors' concern that they're taking fiduciary risk in putting this kind of option in their plan. Just as with automatic enrollment and automatic contribution escalation and QDIA, they want that same kind of safe harbor to have an income option in the plan.
How do you convince regulators? We continue to have conversations (with regulators) and really try to put real-life experience on the table from the plans that have it and now are thrilled. We have over 7,000 plans with this option (provided by Prudential). ... At this point, we've got enough evidence to suggest this is a good thing to have ... but this fiduciary safe harbor is an important piece.
Why are small and midsize plans more willing than larger plans to adopt an in-plan option? They are early adopters. They're more willing to take risk for whatever reason; I don't know that I can put a specific tag on it. They are more willing to do something that they feel is in the best interest of their employees. The other thing that I think has happened in the last year or year-and-a-half is the realization that target-date funds are “to” retirement — not “through” retirement. There's not a guarantee associated with them. The fact that even the shorter term funds lost so much value in 2008 and 2009 highlighted that there's not a guaranteed income component to them.
Aside from a safe harbor, what else needs to be done to convince sponsors — and participants — about retirement income solutions? I believe defined contribution plans — instead of being thought of as retirement savings plans — should be thought of as retirement income plans. That's really what they're ultimately designed to do. In the 1980s and the 1990s, there was so much focus on ...'What's my account balance?' and "How many investment options do I have?' Well, we know that the focus on investment options led people to say "I'm confused — simplify.' For whatever reason, they don't do the math that translates the account balance into what it's going to produce in term of an income. When you get them to think differently about that plan and you put it in income terms, there is complete shift in mindset. ... Even before we talk about (a) product and having an option inside the plan, the framework for the plan itself needs to be framed in terms of a retirement income — because that's what going to replace pension plans.
Prudential has had a strong increase in DC assets under management thanks to gains in stable value business, especially to higher sales to third parties. Why this approach? The growth strategy here is we are a significant provider in the full-service market, but there's a lot more to the retirement market. We have certain markets that we're interested in pursuing. ... The strategy has been, where else can we take our product manufacturing capabilities and expand and support market needs? And that was (a) good example of where, particularly in very large plans, they were looking for a different structure in stable value. The banks had stepped away from the market in 2008 and 2009 when they recognized the risk that I'm not sure all of them completely understood when they entered the business. ... That's our sweet spot. The benefit here is that because we do a full-service business we really understand the risk and know how to underwrite. That has been a very large growth opportunity. ... We have our own distribution channel and there are other distribution channels, so that's the way we look at the third-party market.
Will the banks continue to pull back from stable value? I think that's likely to continue. The banks have to look at what's their core strategic focus (and) where do they want to deploy capital. This has been more of a niche activity for them than a core activity. I don't expect that to change any time soon.
How do you assess the stable value market today? I think we're comfortable with the risk that we've got. We can continue to provide a good product at a reasonable price. A lot of the opportunity depends on how much the asset class continues to grow in terms of the overall scheme of retirement savings. There was a big shift to stable value in 2008 and 2009. The piece of the pie expanded, too. Is that going to continue? Certainly not at the rate it did. That was an even-driven, market-driven shift.
This article originally appeared in the January 7, 2013 print issue as, "Learning from dad".