Not a day goes by when there isn’t an article published about the huge amount baby boomers will be receiving at retirement from qualified retirement plans. Banks, brokers, and life insurance companies are aggressively pursuing this enormous opportunity. Credit unions, as the trusted partner of our members, need to ensure their rightful place in this intense competition for our members’ hard earned retirement assets. What is your credit union doing to attract retirees?
While many credit unions have investment programs and recognize the need to be proactive in their efforts to effectively market to members, many credit union executives and investment program managers have told us that they are fearful of missing the opportunity to capture these assets. Their concerns certainly have a basis as we all acknowledge that the competitive landscape is not in our favor.
Members who have reached or will soon be reaching the end of their peak earning years have a distinct set of concerns. They generally have a shorter time horizon for their investments and a significantly different risk profile than other participants in a company sponsored retirement plan. We use the term “Transitioning Investors” to describe them. For these individuals income replacement is either an immediate need or will be a need in the near future.
While they may want to continue seeking long-term appreciation on some of their investments, preservation of principal and income replacement have become primary goals for at least a portion of their accumulated assets. As the average life expectancy of Americans continues to increase, income replacement is a growing concern amongst the retiring and retired population. An immediate fixed annuity is a solution that is well equipped to meet the needs of income replacement for an annuitant and possibly beneficiaries.
Why Immediate Annuities?
An immediate fixed annuity, also referred to as a single premium immediate annuity, is a contract between a member and an insurance company that offers a guaranteed monthly income for life or a specific term regardless of economic conditions. Immediate fixed annuities are purchased by people who wish to convert assets into a stream of income tailored to their needs. The benefits are determined at the time of purchase and are guaranteed for life or a specific fixed period, such as 10 or 15 years. This strategy may allow them to continue investing the remainder of their retirement assets with a longer time horizon in mind, which may help guard against the possibility of outliving one’s resources.
Shopping for the lifelong income has shown to be a sensitive purchase. Members want to know that they are getting a good value from a trusted resource. Income Solutions® is one of the very few programs, if not the only program available that allows individuals, independent of their employer, to convert retirement assets to a guaranteed income stream through the purchase of an immediate annuity at wholesale price. For the first time individuals can benefit from a similar competitive quoting process and pricing that large institutional buyers have access to and they can choose not only the annuity terms that best meet their needs, but select the provider as well.
While some readers may believe that this program would detract from their existing financial advisory platforms, this is clearly not the case due to the way the program becomes integrated into your existing financial planning delivery and marketing channels. While the commissions generated will result in lower gross revenue to a credit union from annuity sales, overall investment program revenue should increase significantly due to the large number of referrals received as a result of leveraging Income Solutions®.
If credit unions fail to embrace innovative solutions like Income Solutions, the possibility of missing the opportunity of engaging with our members in their retirement planning will be realized since our competitors are already leveraging programs like this. Additionally, it is very likely that such solutions will be offered to our members as a voluntary benefit at their place of employment.
Stephen J. Ryerson is the President of UNFCU Financial Advisors, a wholly owned CUSO of the United Nations FCU ($2.5 billion in New York City, NY). It is focused on delivering innovative financial solutions to the credit union community. As a global CUSO, UNFCU FA collaborates with credit unions to deliver a comprehensive suite of US and international financial programs in investments and investment management, insurance, group benefit programs, retirement plans, financial planning & consulting, fidelity bonds & property and casualty insurance. They can be reached at 212-324-3900 or emailed at firstname.lastname@example.org. Additional information can be found at www.unfcuadvisors.com
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