Moving from Retirement Accumulation to Distribution: Annuities and Stable Value

In the nearly four decades since the creation of the first 401(k) plan, the retirement industry has done an admirable job developing additional tools, products and services to help Americans accumulate retirement assets. It’s only recently, though, that the industry has begun to turn its attention to helping Americans convert their accumulated savings into retirement income. The winners of that contest, suggests Kelli Hueler, founder and CEO of Hueler Companies, will be those organizations—including stable value providers—that learn to engage directly with retirees.

“Stable value is a very important portion of the retirement plan for most of the folks we talk to,” Hueler said in a presentation at the 2019 SVIA Spring Seminar. “If it’s in their plan, it’s a very important piece of their overall portfolio. But until stable value starts being messaged out the way lifetime income is beginning to be messaged to the individual—touching the individual, educating them more about what it can do for their household, for their ongoing investment needs—that’s going to be a real limitation for the stable value industry. It’s also a really great growth opportunity, but it’s only going to happen for those organizations that are willing to message out directly to the participant.”

Hueler Companies has already embarked on the path to personalized contact with individuals. After more than a decade working solely in the stable value business, first as a consultant and later as developer of online systems for bidding and contract procurement, the company launched a companion business in the early 2000s called Income Solutions, whose automated platform allows individuals to research and purchase qualified longevity annuity contracts.

Hueler said that when organizations reach out to individuals, their message needs to be clear and they need to deliver concrete solutions. She noted, for example, that some innovative asset managers are starting to think about how retirement income solutions might be incorporated into target-date funds, which have become wildly popular in defined contribution retirement plans but generally don’t provide any sort of income guarantees.

“If they (asset managers) want to grow that part of their business, they can’t keep talking about income with no actual bottom-line solution,” Hueler argued. “They can’t keep saying, ‘Well, there’s a 90% chance you’ll be good to age 90, you should feel great.’ Have you ever looked a person in the face and said, ‘You’re 10% likely to fail?’ Trust me, their reaction is not good. The need for guaranteed income, the need for stability in the investment portfolio, will only get greater as this generation continues to age.”

Hueler envisions a time when retirees will be able to consult a menu of retirement income options where they can learn about and choose one that’s right for them. “Hopefully it should include stable value, and it should include lifetime income,” Hueler said. “It also should include the opportunity for them to see what those solutions look like combined with the rest of their portfolio. We think the retirement income menu is an idea whose time has come.”

Hueler warned that retirement industry organizations that don’t participate in providing these types of solutions, and in giving flexibility to retirees in choosing the products that make the most sense for them, will be bypassed by those who do. “Technology is going to allow for movement around anything that’s a pillar, that’s inflexible,” she said.