A new partnership stands to revolutionize the traditional focus on retirement accumulation with some old-fashioned concepts of education and advice empowered by new technology.
One need look no further than the tsunami of new retirement income solutions to see the shift in focus in our industry to the process of decumulation. However, a new partnership—Morningstar Investment Management LLC and Hueler Income Solutions, LLC, now joined by HUB Retirement and Private Wealth—offers a managed account solution integrated with unprecedented real-time access to personalized information regarding institutionally priced lifetime income options.
Barbara Delaney, Senior Vice President and Retirement Consultant with HUB Retirement & Private Wealth, says this is a “changing model” for the advice industry. It’s an opportunity—perhaps an imperative—to reengage participants “like we did in the 1980s and 1990s,” Delaney says. A long-time champion of the need for retirement income solutions in workplace retirement plans, Delaney has been the driving force of this effort over the last several years alongside the teams at Morningstar Investment Management and Hueler.
Indeed, she and Kelli Hueler, CEO for the innovative lifetime income/annuity platform developed at Hueler Income Solutions, have been strategizing for years as to how best to bring not only the insights, but also access to the institutionally priced alternatives available through the platform.
Hueler and Delaney are both fierce advocates for the need for a cost-effective solution to the retirement income “gap”—and in the new partnership with Morningstar, coupled with HUB’s distribution potential may be just that. Both acknowledge that while the accumulation phase of retirement preparation can be effectively generalized by broad-based elements such as retirement (target) date. Decumulation, in contrast, tends to be uniquely personal; one’s health matters, for example, as does the cost of living where you are actually living. Decumulation strategies which fail to take this into account are doomed to fail, Delaney says.
How it Works
Basically, participants who opt for the Morningstar managed account solution have access to real-time pricing of the annuities offered through the platform, customized to their timing and balance. This allows them—with or without advisor involvement, though it’s anticipated that the advisor will play a key role here—to get a realistic sense of what they can obtain as guaranteed retirement income, This is far superior to the approximations produced by calculators (or the SECURE Act’s mandated publication of projected retirement income on participant statements). And it’s more than just information or the education that accompanies this access—via the platform, participants can act on that information in real time.
Beyond that, Delaney explains that the Morningstar platform will help participants determine the most tax-efficient ways of withdrawing their savings, then ask if the participant would like to guarantee some part of the income projections. If so, it will direct them to the Hueler platform to act on that desire. “It’s the SECURE world come to life,” she says.
Objection Able
Of course, a series of consistent objection points are often raised with regard to these solutions: their cost, their complexity, portability between recordkeepers (or lack thereof), and fiduciary liability associated with choosing a provider for lifetime income that, with 20/20 hindsight, might turn out to be viewed as a questionable decision.
With regard to the latter, one thing that’s different about this approach is that it can exist both as an in-plan or an out-of-plan solution. Hueler is agnostic on that point, and while that is often raised as an objection, she maintains that her experience with larger employers that have engaged the platform over the years is that they don’t see that as an issue—certainly not once they understand the approach used in vetting annuity offerings on the platform, which she describes as “well beyond” the expanded safe harbor for review in the SECURE Act.
And while it also differs from designs that seek to “imbed” the lifetime income purchase as part of a target-date fund glidepath (though Hueler explains that it can be integrated with a TDF), or positioning annuities as a default investment as recent legislation has proposed, Hueler refers to the new approach as a default “path.” Once on that path, participants will have access to continuous annuity conversion values, filtered by recommendations from a 3(38) advisor. As they near retirement, they’ll get prompts about the availability of the option for some—or some part—of their account. If they choose to do so, the platform allows them to do so with access to real-time pricing based on their actual account values.
As for cost considerations, all of this comes with no additional cost beyond that of the managed account itself, she explains—including no transaction costs.
Better Outcomes
Hueler emphasizes that especially in this era of uncertainty, access to this kind of information provides a substantial increase in confidence levels. “Armed with this information, people have better outcomes, and feel better about it,” she explains. “They know how much money they have to spend.”
While the current offering certainly benefits from integration, Hueler explains that the vision is to be inclusive, rather than exclusive. “Anyone who wants to sit at the table can,” she emphasizes. Delaney sees not only an expanding opportunity for newly empowered advisors, but also the potential for the support of call centers for retirees and near-retirees staffed by “retired” individuals.
Ultimately, while knowing “how much” may be the most important question to answer about retirement income, being able to do something about it in real time, with the involvement of an advisor, may indeed be a new era for advisors—ushered in by the dedication and persistence of individuals like Delaney and Hueler.
