In the past hundred years, the 65+ segment of the population has tripled. Twenty-five percent of 401(k) participants will retire between now and 2015, and the 65+ segment of the population will grow by 47 percent by the year 2010. The writing is on the wall; with a significant portion of the population entering retirement in the next ten years, a significant portion of the nation's savings will be leaving 401(k)s and other retirement vehicles. Where this money will land is not yet clear.
For the past decade, every avenue of financial services institutions has been competing for the business of growing retirement assets. With its heritage firmly ensconced in security and protection, the life insurance industry has competed actively with growth-oriented mutual fund companies and brokerages for customers' retirement business in an environment where accumulation is a priority.
As individuals enter retirement, their priorities naturally shift. While mild growth to offset inflation is a plus, their investment strategy becomes focused more on protection, risk-aversion and properly distributing assets over time while minimizing exposure to taxation. As retirement plan participants are faced with the decision of where to park their significant savings for the next stage of their life, they no longer feel as philosophically aligned with the stock broker or mutual fund company whose aggressive and growth-oriented tactics were so instrumental in growing their retirement assets. Frankly, this customer plays right into the bread-and-butter services offered by life insurers. With the movement toward retirement planning, life insurers pushed hard into mutual funds and other financial products. Having established a presence in this arena, life insurers are keenly situated to steal rollover business from competitors by offering a complete suite of products to the retiree who desires the protection and distribution qualities of annuities but also wants to "stay in the markets" with a diversified mutual fund product that is oriented toward equities and bonds.
However, looking at the Web sites and pamphlet marketing collateral of the nation's largest life insurers, it appears as if they have thus far missed the boat in terms of marketing their considerable qualifications for managing customers' in-retirement needs. While other financial services verticals have jumped on the rollover movement, life insurers, as evidenced by their Web site marketing, appear to be planted solely in retirement planning mode.
MassMutual's corporate Web site promotes "Retiring Comfortably" directly in the center action area of its home page, but follows up only with information about retirement planning and products such as life and disability income insurance. Northwestern Mutual's "Retirement Solutions" area features thirteen pages of content, the first twelve of which are focused on themes and products related to preparing, planning and looking ahead to retirement. The final page of content addresses some in-retirement themes, such as risk tolerance, changes in investment strategy and future needs, but Northwestern Mutual misses an opportunity to get into detail and show that it offers services designed specifically for customers in retirement. More important, the firm does communicate that its financial professionals are prepared to sit down and devise an in-retirement plan. MetLife offers a useful tool for determining how much income will be generated per month from a specific amount of assets over a specific duration of years, but it uses this as a hook to incite customers to more actively plan for retirement. MetLife's only in-retirement content (the "Enjoying Retirement" section of its "Life Transitions" area) focuses primarily on topics of daily routine, volunteering, relocation, and new hobbies with scant mention of finances. Prudential Financial probably does the best job in that its "Retirement Planning" area includes a section on managing retirement rollovers. Prudential is one of few life insurers to actually address a soon-to-be retiree's specific rollover options. Prudential's "In Retirement" area exhibits a current best practice, providing a mock-client scenario where the situation, goals and concerns of a fictional couple are discussed at length, and detailed solutions are offered by the couple's Prudential financial professional.
The massive transfer of assets out of retirement plans that is beginning today is of historic proportion and represents one of the most significant opportunities for life insurers in decades. Life insurers can provide new retirees access to the right products: mutual funds, fixed income funds, variable annuities and the list goes on. More important, this customer is entering a new stage of life and is open to switching to the provider that can provide them with the greatest peace of mind that their assets will be protected and distributed at the right (and consistent) pace. With this customer, knowing the NASDAQ best is no longer as valuable an argument for the brokerages and mutual fund companies.
However, if life insurers are to capture the business of brokerages and mutual fund companies, they must be more direct and more aggressive with their approach. The status quo is so vague and buried that it will convince primarily only those ready to be convinced. Adding a couple of in-retirement articles to a Web site will not do. Rather, life insurers must rebrand themselves as in-retirement experts and the Web should play a significant role in this effort. Marketing language must be directed specifically at the customer who is rolling over 401(k) assets and the argument must be made that life insurers (and specifically their financial professionals) are properly equipped to transfer the protection characteristics of their life insurance products to the strategic allocation of their investment products. For the true opportunity to be seized among soon-to-be retirees, the message must be sent loud and clear that life insurers have designed specific services around protecting the assets of in-retirement customers and devising the right income distribution strategies for each customer.
Tim Carpenter is an insurance industry analyst with Watchfire G´mezPro in Waltham, MA. He can be reached at [email protected].