AB (formerly AllianceBernstein) has created a unit that will take a discretionary fiduciary role in the selection of annuity providers for the firm’s Lifetime Income Service solution.
Acting as a 3(38) discretionary fiduciary, AB is hoping to alleviate one of the big objections to plan sponsors offering lifetime income services: fear of repercussions down the road if the annuity provider fails.
After saving enough for retirement and then investing wisely, investors want to be sure they do not run out of money in retirement, a concern with people living longer. So lifetime income is the holy grail for asset managers, potentially even more important to investors than IRA rollovers — the third leg of the DB-ization of DC plans. But plan sponsors remain reluctant to offer in-plan retirement income solutions — there is a lot of downside and little upside.
“We think it is clear that policymakers and regulators have initiatives underway to encourage plan sponsor adoption of guaranteed income solutions,” said Richard Davies, Senior Managing Director, Defined Contribution at AB, in a news release. “With our new fiduciary service, a plan sponsor can delegate responsibility to AB for its insurance product selection. This should make plan sponsors feel more comfortable in offering employees guaranteed income in retirement.”
AB has been an early leader in custom multi-manager target date solutions, with $35 billion AUM. It has also taken a leadership role in lifetime income products, with United Technologies as the first client. AB is creating a marketplace for annuity providers, acting as the discretionary fiduciary in the selection of insurers in a multi-provider solution. Though a regulatory safe harbor would be ideal, AB has created double protection with their new service.
