The coming generation of new products for retirees is more likely to put a premium on combining existing financial instruments rather than on rocket science to build new ones, market watchers say.
All of the pieces in play "have existed from day one," said Christopher Blunt, executive vice president, retail investments, with New York Life Investment Management, New York. The issue now is how to best combine them to meet the needs of retirees, who'll need "one quarterback" to manage their finances, he said.
Market watchers say Fidelity Investments took the lead with its June 2004 launch of its Fidelity Retirement Income Advantage service, which the Boston-based giant said would help investors "with the complex task of planning for, monitoring and managing their complete financial situation throughout retirement."
And just last week, MassMutual Financial Group — the Springfield, Mass.-based mutual life insurer that boasts money management units such as OppenheimerFunds Inc., New York, and Babson Capital Management LLC, Boston — threw its hat into the next-generation product ring, unveiling a new "retirement management account."
The MassMutual product's four-point structure includes model mutual fund portfolios "containing OppenheimerFunds" and a "unique immediate annuity" that allows incremental purchases of annuity income benefits by "laddering" assets from the mutual fund portfolios over time.
The other pillars are a ‘retirement income planning tool and an administrative system that "provides a single check for the client that includes systematic withdrawals from mutual funds along with payouts from the annuity."
The dynamic for the customer here is "completely different from the accumulation phase," said Spencer Williams, a senior vice president with MassMutual overseeing the product.
Creating new products like the RMA to manage the payout process will allow retirees to add an element of asset allocation — between equities and annuities — that is key to meeting the needs of retirement, he said.
Mr. Williams said while there are several products in the market that combine elements of annuities and mutual funds, MassMutual and Fidelity might be the only ones now offering comprehensive programs.
Executives with competing firms, who declined to be named, said they too are looking to bring similar products to market. "At some point, everybody's going to do something similar," said one.