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Figure 16: Technology and Process Components of an Effective Retirement Income Solution

Source: Aite Group

Advisor training provides the single biggest challenge and opportunity area for carriers and distributors that want to provide better context for their product sales with effective retirement income solutions. Instead of focusing just on meeting FINRA regulatory requirements, carriers and distributors should require comprehensive, rigorous training across products and focus on how to implement real retirement income strategies—not prescripted product sales. These strategies should combine optimized, floor-level guaranteed income with the appropriate, low- cost accumulation strategies that allow investors to manage inflation risk. Carriers that offer guaranteed-income solutions need to staff up with certified financial planners (CFPs) or other trainers that can effectively train advisors how to implement effective retirement income strategies.

Once trained, the advisors' CRM service provides the key technology integration point for retirement income solutions because pre-fill of client data with income planning, performance monitoring, electronic order entry, and other applications will increase productivity and support advisor adoption. CRM services will also allow advisors to become more proactive, alerting themselves and their investor customers when changes to the existing retirement income plan are required. Consolidated, household-level account view Income planning software

Automated funding and implementation Performance measurement, monitoring Advisor training CRM client data

The CRM service should also help to provide a household-level view of the customer and integrate with a third-party account aggregation application like Albridge to provide a

consolidated view of the investors' and household members' investments. The tax cost basis of all investment holdings must be understood to avoid costly mistakes with income planning, and income and assets of other household members must also be understood.

Once customer needs and investment holdings are understood, income-planning software should illustrate the appropriate range of retirement income scenarios with different planning scenarios and product combinations. The income planning software should extend the capabilities of most financial planning software and more intuitively illustrate the retirement income scenarios so the investor and advisor can discuss them and convert them into an implementation plan.

Product implementation needs to be as easy as possible for the advisor. Prebundled

accumulation and guarantee products funded through a single customer account and transacted with electronic order entry provides the ideal scenario. Like that enabled through Ebix's AMP product, withdrawals and after-the-initial-sale activities should flow back into the advisor workstation or portal so that the advisor can maintain a consolidated view of all related product activities. The funding should occur through a centralized, integrated account. Integrated, ongoing performance measurement and monitoring should be in place to execute the plan, track progress against the plan, and make ongoing adjustments.

Pershing's NetX360 platform provides the best available solution for bank and non-self-clearing, independent-broker dealers that want the key technology components for a retirement income solution. Envestnet provides an out-of-the-box retirement income solution that focuses mostly on the RIA market and includes some of the above components.

Annuity insurers should focus immediately on banks and affiliated, independent broker-dealers to implement these kinds of solutions, providing the necessary product and other training where necessary and relying on clearing platforms like Pershing to provide the technology backbone.

RECOMMENDATIONS

Aite Group recommends that annuity carriers:

 Make your retirement income strategy a key part of the business case for integrating with Ebix's AMP product. To implement effective retirement income solutions, advisors will need access to all after-the-sale activities with the investors' products. Complement the hard-cost, customer service business case with this more

compelling business case.

 Use RegEd's annuity training exchange platform to update advisor-training status and streamline the communication between advisors and carriers related to the 2010 state-, product-, and carrier-specific requirements for detailed product

training. When coordinating advisor training, verify that communication breakdowns are not happening between carrier and broker-dealer compliance or operations departments.

 Re-allocate human resources investments from annuities wholesalers to certified financial planners or other parties that can train career or third-party advisors in effective retirement income planning and implementation processes.

 If you have 401(k)/defined-contribution businesses, build formal cohesion between those business units and annuities business units. 401(k) and IRA rollovers are the single biggest opportunity for annuity carriers, so those that can influence both the defined contribution plan and the ultimate source of lifetime retirement income should do so.

 At least begin to experiment with fee-only variable annuity products. A persistent market trend is toward fee-based accounts and compensation both through large broker-dealers and with the continued growth and importance of the RIA

distribution channel.

Aite Group recommends that non-top 10 banks and independent broker-dealers:

 Remove ticket fees to advisors that help drive them away from using electronic order entry annuity entry on popular correspondent clearing platforms like Pershing and NFS. Reduced compliance risks drive the business case for doing this.

 Increase commissions or fees for advisors that use electronic order entry and invest significantly in advisor training for electronic order entry use, if necessary.

 Require that your correspondent clearing platform provider offer alternatives to Ebix for electronic order entry—particularly FireLight and AFFIRM.