Defining a New Asset Class

Ever wonder how you can offer lifetime income without sacrificing growth, control, or simplicity? See how we did it.

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So as the Secure Act passed in 2019, we saw that as a real opportunity for us to look and maybe innovate in the market. We knew that income was a problem we’ve been trying to solve for the past 20 or 30 years, it’s not anything new. And there are solutions in the market today. They’re just not widely adopted because, since 2006, target date funds have been the largest acquirer of assets in the retirement plan business.

It’s a very simple strategy for participants. It’s sort of a set-it-and-forget-it. They invest it. The asset manager glides along a path and it’s done a very nice job of helping control risk and helping these underlying participants stay invested in the market and then accumulating large assets by the time they’re 65. But there’s a challenge, those products don’t pay guaranteed income.

So now I’m 65 years old and and what do I do in order to drive that income? Historically, if we purchased an annuity and a guaranteed plan, we’d give up growth, either because we were investing in something that had a wrap on it and therefore an additional fee, which provided fee dragging underperformance over 10 or 15 years. It wasn’t worth it, it wasn’t worth the income.

I had to give it liquidity and portability. I had to make a decision today that was irrevocable. And then lastly, it wasn’t easy and it certainly wasn’t efficient. And so that’s what we used as a foundation to develop our solution. If we could take an annuity and turn it into an asset class and embed that into a target date fund, then we’d have a target date fund that works like anything else. And as a bonus, drove guaranteed income.

So think about your traditional target date fund. It has equity and fixed income and maybe some non-correlated assets and commodities. Our solution is the same way. It has equity and fixed income. And we’ve taken a group fixed indexed annuity and we’ve given it a daily net asset value. So it trades like any other asset class.

So now you have one target date, NAV, with underlying investments that are made up of equity, fixed income and Lifetime Income Builder. And what that essentially does is it gives you all of the things that the underlying participant wanted. It gives them same potential for growth. It gives them the same liquidity and portability. The decision for them to make. I want to buy today. I want to sell it tomorrow. Move it with them. It gives them all that control.

And then it’s 100% done by the asset manager. There’s never a decision the individual participant needs to make. The asset manager moves it along the glide path. They determine when they should buy Lifetime Income Builder and how much of that they should buy. And what does that do ultimately, is it gives them guaranteed income that they can’t outlive.

Patent Pending
This website is intended for institutional retirement industry professionals.

• Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value

This material is not a recommendation to buy, sell, hold, or roll over any asset, adopt a financial strategy, or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person.

Lifetime Income Builder will be powered by an insured guaranteed income solution issued by an insurance carrier that the plan fiduciary has determined qualifies for the safe harbor provisions of ERISA section 404. All guarantees and protections are subject to the claims-paying ability of the issuing insurance carrier. Lifetime Income Builder does not directly participate in the stock market or any index. It is not possible to invest in an index. Withdrawals are subject to income tax, and withdrawals before age 59½ may be subject to a 10% federal tax penalty.

Investing involves risk including the risk of loss of principal. Such activities may not be suitable for everyone.

Each target date fund (“TDF”) in a series is established by a trustee (the “Trustee”) and held in a collective investment trust (the “Trust”). The Trust is a bank-sponsored collective investment trust and not a mutual fund. Different series for the TDFs have been established by the Trustee and operate differently. The Trustee manages the Trust and has ultimate investment authority for each TDF in the applicable series.  The Trust is exempt from registration under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended. Because the Trust is not registered with or required to file prospectuses or registration statements with the SEC or any other regulatory body, neither one is available. Investors should consult the Offering Memorandum for the applicable series and carefully consider the investment objectives, risk, charges, and expenses of the TDFs in that series before investing.  Investors should further consult the Offering Memorandum for the applicable series to understand how the TDFs provide lifetime income, including whether a certain amount of lifetime income is guaranteed or not, how the income payment percentages at income activation are set, whether a joint income option is offered, and if so, how election of that option impacts income payments, how the high-water mark is set, and other important details regarding the operation of the TDFs in the applicable series. 

“Lifetime Income Builder” is a group fixed indexed annuity with a guaranteed lifetime withdrawal benefit (a “FIA”). Each TDF may invest in more than one FIA. Advantage Retirement Solutions, LLC (“ARS”) is the inventor of Lifetime Income Builder. Lifetime Income Builder is not provided by or guaranteed by the Trustee, ARS or any of their affiliates.

The TDFs invest in FIAs that are intended to back the Trust’s investment objectives, lifetime income. Each FIA is issued by an insurance company to the Trustee. The FIAs provide guaranteed payments to the Trust and are subject to the claims-paying ability of the issuing insurance companies. The FIA guarantees are not made to the participants, and participants are not beneficiaries of any annuity contract. If the value of the other investments in the TDFs reaches zero at or after income activation, income payments are adjusted as detailed in the applicable Offering Memorandum.

The TDFs are designed for investors expected to retire around the year indicated in each TDF’s name. When choosing whether to invest in the TDF for which an investor age qualifies, investors should consider whether they anticipate retiring significantly earlier or later than age 65 even if such investors retire on or near a TDF’s target date. There may be other considerations relevant to determining whether investment in the TDF best meets their individual circumstances and investment goals. The TDF’s asset allocation strategy becomes increasingly conservative as it approaches the target date and beyond. The investment risks of each TDF change over time as its asset allocation changes.

An investment in a TDF is not a bank deposit and is not insured or guaranteed by the insurance companies, the trustee, the asset manager, the Federal Deposit Insurance Corporation (“FDIC”), or any other government agency. The Trust is not insured by the FDIC and is not registered with the Securities and Exchange Commission.

The information provided herein does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security or a product, or a recommendation of the suitability of any investment strategy for a particular investor. It does not take into account any investor’s particular objectives, strategies, tax status or investment horizon.

All information is from ARS (except where noted otherwise) or has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The whole or any part of this work may not be reproduced, copied or transmitted without ARS’s express written consent.