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Financial Firms Launch an Alternative to Annuities to Attract Retirees

Post a Comment December 3, 2009 – 10:37 am | Post Link |  Print This Post |

Investment managers are developing lower-cost alternatives to annuities to help customers — and advisors — spend their savings after retirement.

Fidelity Investments and Vanguard Group have both rolled out products designed to manage retirement savings and parcel them out in monthly increments, and Brinker Capital is working on one.

Advisors have focused on asset accumulation for decades, and executives and analysts said that shifting their attention to products geared toward spending will help them retain clients after they retire.

“Annuities are good products, but some clients just don’t like them,” said Noreen Beaman, a principal at Brinker Capital. “Advisors need an alternative if they want to retain customers and assets.”

Analysts said retirement income planning remains a hot topic, but the focus has been squarely on annuities, despite their drawbacks. Fixed annuities lock up principal and do not offset inflation; the costs associated with variable annuities usually exceed those of mutual funds, and monthly payouts can be meager.