Financial Crisis

The Wall Street Journal reports that there are increasing numbers of financial advisors leaving larger Wall Street firms to pursue careers as independent advisors: The number of financial advisors at major Wall Street firms fell 14 percent to 55,000 for the three years ending December 2008. The number of independent advisors increased 29 percent to 33,000 during the same period of time. The financial crisis had a clear impact on larger firms such as Merrill, Smith Barney and UBS. That said,...

Much has been said about the impact of the financial crisis on variable annuity products and insurers. Wall Street Journal columnist Leslie Scism recently wrote about the first wave of variable annuity product redesigns to hit the post financial crisis market. Common themes include simplicity, cost efficiency and conservative benefit features. Scism provides some very good detail on the most recent wave of guaranteed living benefit features. Source: Wall Street Journal Full Story

Demand for longevity risk has been returning to the UK pension market. High levels of volatility during the financial crisis deterred many players in the pension buyout market. The return to normalcy in the capital markets may, in fact, be contributing to under-pricing of longevity risk among those who are providing solutions to UK pension plan sponsors who seek to offload longevity-related liabilities. A worthwhile article in the Financial Times discusses the range of options that are...

It turns out that many target date funds are juiced by high yield or "junk" bonds. The issue is that target date funds (which presumably become more conservative over time as participants age) are riskier than what is generally perceived by consumers, regulators and financial advisors. This higher level of risk is consistent with the higher than expected volatility and losses experienced by many target date funds during the financial crisis. According to a recent Bloomberg article, up to 35...

Variable annuity net asset values have recovered to pre-financial crisis levels. Buoyant capital markets over the past several months have resulted in the first increase in variable annuity net asset values in fifteen months. Gross variable annuity sales in the third quarter of 2009 were $31 billion. Qualified sales were $20.8 billion while non-qualified sales were $10.2 billion. Net sales of variable annuities in the third quarter were only $2.8 billion, which begs the question of why there...