Natixis exec: Don’t include lifetime income options in 401(k)s

As the clock winds down on federal regulators’ request for comment on the inclusion of lifetime income options in 401(k)s, a fund company executive today weighed in on the subject.

John Hailer, president and chief executive of the North American operations of Natixis Global Asset Management, today fired off a letter to Phyllis C. Borzi, assistant Labor secretary and head of the Employee Benefit Security Administration, arguing against the use of annuities and target-date funds in retirement plans.

“Simply put, investments or products that employ a ‘set it and forget it’ strategy are unlikely to be successful in generating lifetime income,” Mr. Hailer wrote. “Products hat require ‘contracts,’ ‘lock-ups’ or otherwise impair the investor’s ability to access the principal or adapt to market changes may not be appropriate for a long investment horizon.”

Instead, he supported the use of a diversified portfolio of mutual funds, which he said not only can be built to provide income over a 40-year investment horizon, but also have the regulatory oversight and transparency consumers need.

Fund companies have added alternative-strategy mutual funds to reduce market correlation, Mr. Hailer wrote.

Still, it will take more than a product change to set plan participants on the right track. In a speech given today at a Natixis conference, Mr. Hailer advocated the use of advice among participants.

“They may be worried about retirement, but at the same time, there’s no real advice or guidance,” he said. “People are looking at their principal — their retirement money — and wondering ‘Where do we go?’ There’s nobody helping them on advice to go forward.”

Despite the fact that plan participants will need guidance with their retirement dollars, the majority of workers who have saved for retirement appear to feel confident that they have invested wisely, Dallas L. Salisbury, president and CEO of the Employee Benefits Research Institute, said at the conference. He cited data from the group’s Retirement Confidence Survey, which polled 902 workers and 251 retirees.

Thirty-two percent of the polled workers who said they were saving (706 respondents) said they were “very confident” that they had invested wisely, while 54% said they were “somewhat confident.”

“Where do they get the advice?” Mr. Salisbury asked. “A third talks to a professional, and the vast majority gets their advice from their families and friends.”