a Morningstar company
Lifetime Asset Allocation Solutions
Odeh H. Akkawi, CFASenior Consultant
March 23, 2010
2 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
2 IB0008 App1109
Ibbotson Associates Overview
Dedication to innovative researchFounded in 1977 by Roger Ibbotson
Create customized solutions for institutionsExpertise in asset allocation, manager selection and portfolio construction
Leverage two trusted brandsAcquired by Morningstar in 2006a Morningstar company
Asset Allocation
Manager Selection
Portfolio Construction
3 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
3 IB0008 App1109
Today
Leading provider of investment advisory services
× $48.0 billion assets under advisement for investment consulting× $13.2 billion assets under management for managed accounts
serving over 9.1 million participants
Experienced investment professionals
× Staff averages 10 yrs investment experience
× Most have either Ph.D., CFA, MBA or combination
Award-winning research
× 2 patents granted for asset allocation and human capital
× 75 research papers written or co-authored
$61.2BTotal Assets
100Clients Worldwide (US, Canada, Europe, Asia)
+
6Graham and Dodd Awards
Data as of September 30, 2009.
4 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
4 IB0008 App1109
Customized Solutions
+Our Strengths Research and Methodology Brand Independence and Experience
Manager Selection
Our consultants meetwith the client to assess initial need and are involvedthroughout the process
Client Customized Solutions
Portfolio Construction
AssetAllocation
Ibbotson Consultants
Our capabilities can beused separately or incombination to producecustomized solutionsdesigned to meet specific client needs
Client
+
5 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
5 IB0008 App1109
Lifetime Financial Advice
6 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
6 IB0008 App1109
Traditional Asset Allocation Framework in AccumulationEx
pect
ed R
etur
n
MVO Efficient Frontier
Individual Assets
Standard Deviation
×Optimizer is sensitive to changes in inputs – leadsto large changes in allocations
•Sensitivity Analysis leads to Ibbotsonguidelines
•Re-Sampling minimizes the output of MVO
×Ignores liabilities on one’s assets•Liability-driven investing
×Ignores outcomes•Investors only care about outcomes
×Ignores longevity risk
×Limited only to financial capital noconsideration of human capital
Limitations on Traditional MVO
7 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
7 IB0008 App1109
An Approach Based by on Modern Portfolio Theory
2007 Graham and Dodd Scroll
8 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
8 IB0008 App1109
The Human Capital ConceptBeyond the Traditional Asset Allocation Framework
9 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
9 IB0008 App1109
Total Economic Wealth
Financial Capital
× Tradable assets such as stocks and bonds have traditionally been used when constructing an asset allocation
× Incomplete without considering Human Capital
Human Capital
× An individuals ability to earn and save
× Present value of all your expected future wages including pension and social security
+
10 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
10 IB0008 App1109
How the Stage of Your Career Affects Your Human Capital
11 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
11 IB0008 App1109
Are You a Stock or A Bond?
12 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
12 IB0008 App1109
How the Volatility of Your Career Affects Your Human Capital
13 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
13 IB0008 App1109
Typical Life Cycle of Human Capital and Financial Capital
Risks in Accumulation•Expense Risk•Mortality Risk
•Savings Risk•Market Risk
Risks in Retirement•Expense Risk•Longevity Risk
•Bequest Risk•Market Risk
HC +
FC =
Total
Economic
Wealth
14 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
14 IB0008 App1109
Individual Balance Sheet
Assets Liabilities
Financial Capital
Human CapitalPV of Earnings for Pre-Retirement Expenses
PV of Earnings directed toward Savings
PV of future Social Security and Pensions
Surplus (Deficit)
Future ExpensesPV of Pre-Retirement Expenses
PV of Post-Retirement Expenses
PV of Bequest
PV=Present Value
15 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
15 IB0008 App1109
Ibbotson’s Investment Management Process
Product typeoptimization
× Including Insurance Products can create a powerful solution
16 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
16 IB0008 App1109
Managing Mortality RiskAsset Allocation & Life Insurance
17 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
17 IB0008 App1109
Lifetime Risks:Accumulation Phase
Expense Risk MarketRisk
MortalityRisk
AssetAllocationDecision
SavingsRisk
18 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
18 IB0008 App1109
Modern Portfolio Theory: Markowitz’s MVO and Sharpe’s CAPM
0
Expe
cted
Ret
urn
Emerging Market Stocks
International StocksLarge Cap Stocks
Human Capital (Bond-like Characteristics)
LT BondsTIPS
Cash
Standard Deviation
Retirement Income Liability(Short TIPS-like characteristics)
Max Sharpe Ratio
Market Portfolio
Stocks: 46%Bonds: 54%
19 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
19 IB0008 App1109
Human Capital Impacts Asset Allocation Decision
Human Capital
Target Asset Allocation
Financial Capital
+Ú
Safe HCProfessor
BondEquity
54%46%?
?70%30%
80%
20%
60%40%
Risky HCBroker
Average HC
?
?+
+?
?
20 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
20 IB0008 App1109
Asset Allocation with Insurance Products
Human Capital,
Questionnaire Collect info such as: Age, income, bequest preference, dependents, life expectancy, risk tolerance
Ins
Asset AllocationDecide if need Mutual Funds, ETFs, Separate Accounts
Life Insurance Face Value or
Annuity Product
Inputs Outputs
CMA Capital Market Assumptions
Financial Capitaland Current Savings
21 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
21 IB0008 App1109
Total Economic Wealth
22 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
22 IB0008 App1109
Life Cycle of Human Capital
$025 30 35 40 45 50 55 60 65
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
Insurance NeedInsu
ranc
e N
eed
Age
23 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
23 IB0008 App1109
Total Economic Worth
Human Capital Financial Capital
BondEquity
70%
30% ?
?
High Human Capital Higher insurance demandHigh Human Capital Risky Asset Allocation
+
24 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
24 IB0008 App1109
Total Economic Worth
BondEquity
70%30%
?
?+
Human Capital Financial Capital
Low Human Capital Low insurance demandLow Human Capital Conservative Asset Allocation
25 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
25 IB0008 App1109
Higher risk aversion × More insurance× Conservative asset allocation
Higher bequest motive × More insurance× Little or no impact on asset allocation
Higher current wealth × Less Insurance× Conservative asset allocation
Higher correlation (income vs. returns)
× Less insurance× Conservative asset allocation
Older × Less insurance× Conservative asset allocation
Asset Allocation, Life Insurance, and Human Capital
26 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
26 IB0008 App1109
Managing Longevity RiskAsset Allocation & Annuities
27 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
27 IB0008 App1109
Lifetime Risks:Disbursement Phase
Expense Risk MarketRisk
LongevityRisk
AssetAllocationDecision
BequestRisk
28 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
28 IB0008 App1109
Retirees Should Plan for a Long RetirementProbability of a 65-year-old living to various ages
Source: Annuity 2000 Mortality Tables.
0
25
50
75
100%
65 years old 70 75 80 85 90 95 100 105
• Male• Female• At least one spouse
78 86
85 91
91 96
81
88
93
29 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
29 IB0008 App1109
Thought Leadership in Traditional / Insurance Hybrids
30 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
30 IB0008 App1109
Asset Allocation with Insurance Products
Human Capital,
Questionnaire Collect info such as: Age,income, bequest preference, dependents, life expectancy, risk tolerance
Ins
Asset AllocationDecide if need Mutual Funds, ETFs, Separate Accounts
Life Insurance Face Value or
Annuity Product
Inputs Outputs
CMA Capital Market Assumptions
Financial Capitaland Current Savings
31 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
31 IB0008 App1109
Impact of Guaranteed Lifetime Income Annuity*
*Graph does not include pension and social security
32 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
32 IB0008 App1109
Factor
Proportion to Implement withPA Reason
Large Bequest* Lower Preference to leave more
High Income Sustainability* Higher Preference for personal consumption
High Subjective Survival Probability*
Higher Perceived longevity risk / suitability
High Fees Lower Fees reduce returns
High Income* Varies Ratio of wealth to income need
Large Wealth* Varies Ratio of wealth to income need
* Factors that are typically solicited using a retirement income questionnaire.
Asset Allocation with Payout Annuity:Key Factors
33 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
33 IB0008 App1109
Lifetime Advice Solution
× The investor experience is enhanced: More holistic, lifetime advice tailored to the individual needs of the client
× Innovative solution that addresses advisors need for retirement income solutions
× Hedges mortality risk (Life Insurance)
× Hedges longevity risk (Annuities)
× Unbiased, third party recommendation
× Integrated sales solution
34 Ibbotson Associates, a Morningstar Inc. companyFOR INFORMATION AND/OR ILLUSTRATION PURPOSES ONLY. SOURCE: IBBOTSON ASSOCIATES, UNLESS OTHERWISE NOTED. NOT FOR PUBLIC DISTRIBUTION. ©2009 Ibbotson Associates, Inc. All rights reserved. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use, by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited.
34 IB0008 App1109