Retirement Plan Space Filled With Possibilities And Pitfalls

The defined contribution space -- that is, retirement plans -- might be an area of significant potential business, but it is a world of change.

The challenge for distributors is sorting through that change and figuring out how to adapt business to it, said Sean Cunniff, senior advisor, fintech and research, Streamline Consulting.

Cunniff was joined by Brian Sullivan, corporate vice president, institutional annuities, Stable Value Investments, New York Life, for a session Wednesday on broker/dealer models in the defined contribution space. The session helped kick off the 2019 Retirement Industry Conference.

An early slide in their presentation set the tone:

There is no going back, says Sean Cunniff of Streamline Consulting #retireconf pic.twitter.com/zXQNlRwhU3

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The theme for the conference is "The Nest Egg: Priority No. 1." It comes the same week that Congress is considering the Retirement Enhancement and Savings Act. The legislation cleared a House committee this week and was introduced in the Senate.

The legislation would encourage employers to adopt new retirement plans and reduce the cost of operating retirement plans for their employees. The bill also includes new provisions to encourage workers to plan and save for retirement.

"There's a sense that something is going to pass and it's going to be positive," Cunniff said. Getting people to save is a big deal, he added. The discussion on investment products, asset allocation and retirement spending obscure the real solution, he said.

"It almost doesn't matter if you save a lot for a long time," Cunniff said. "If you get your people in a plan to start early and continually increase, they're going to be OK for retirement."

The baby boomers’ march toward retirement, along with ever-shrinking pensions, virtually ensures that IRA rollovers will continue growing no matter what happens with ongoing regulation efforts, analysts say.

According to recently updated LIMRA Secure Retirement Institute data, the total traditional IRA rollover market will grow steadily in the next five years, exceeding $500 billion by 2021.

One of the big future challenges is educating clients on what to do with their money. Because those customers have strong opinions:

Brokers working to sell retirement products are facing a lot of changes #retireconf pic.twitter.com/hX4sDsAcD5

— INNJohn (@INNJohnH) April 4, 2019

Fee pressure, in particular, is growing, Cunniff said. It is driving providers to consolidate and cut costs. Low-cost funds are pushing fees down. Specialty firms "are going to thrive and grow."

"Our old economic model isn't going to work anymore," Cunniff said. "The days of the broker selling one plan when they don't know anything about the retirement plan space, I think those days are over."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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