October 3, 2011
Janus has just launched a new online retirement income program for financial advisers, called Janus Time Segmentation Framework. The surprising part: it seems better designed for advisers than it does for their clients.
Here's why: Janus' retirement income tool flies in the face of the long-held belief that older investors should decrease their exposure to equities. Instead, the retirement income program advocates increasing risk in later years with the intention of providing adequate income for 30 years or more.
In theory, in light of longevity and inflation fears, the approach is logical.
But as the two bear markets of the past decade have proven, in reality, increasing risk during retirement years could fail investors. Miserably.
Janus' tool guides advisers to create a personalized plan for investors that divides retirement into four phases. Each stage increases risk and gradually replaces investments made in earlier phases.
Thus, in the first five years of retirement, Janus recommends cash and annuities. In the second stage of the next six to 10 years, the portfolio moves into bonds and high-performance, multi-sectoral investments.
In the third phase, years 11 through 20, the portfolio switches to moderate-risk investments, such as large-cap growth and market-neutral investments.
In the fourth phase, years 21 to 30 and even beyond, the portfolio moves into an aggressive phase, investing in small-cap, international large-cap, mid-cap blend and value.
Janus believes this formulaic approach will resonate among financial advisers, as it doesn't require them to learn any new product.
More to the point-while the planning rather than product approach may appeal to financial advisers, is this what their Baby Boomer customers are looking for?
In the three years since the financial crisis hit in 2008, survey after survey-and mutual fund flows themselves-have indicated significantly reduced risk tolerance among investors.
Just last week, a Prudential survey indicated 84% of investors approaching or already in retirement want products that provide guaranteed income-up markedly from 10% in 2006.
Somehow, Janus' Time Segmentation Framework does not seem to meet that desire.