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Written by Tim Ullrich
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Thursday, 09 July 2009 10:44 |
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June was a busy month as firms, now well past the seasonal crunch of tax season and the radical market swings from earlier this year, made changes across the board, introducing new products and marketing campaigns, and some unique new tools as well.
Capital One Introduces (Another) Card Customization Tool
The month began with the introduction of Card Lab Connect, a unique new feature from Capital One that allows non-profit organizations – both big and small – to set up a co-branded affinity card benefiting their organization. Using the Card Lab Connect interface, users can create a custom card design and build a card information page that is hosted on Capital One’s site. The firm also sends users a marketing toolkit that contains tips and tools for marketing their organization’s new benefits card, both online and off.
Card Lab Connect is the first card customization interface we have seen dedicated exclusively to non-profits, and stands as one of the most comprehensive card customization options we have seen overall. In many ways, Card Lab Connect is a product of its time – influenced by the personalization options afforded by social networking sites and inherently customizable devices like the iPhone, consumers today increasingly demand products designed for or by them. Card Lab Connect speaks to that demand, allowing Capital One to reach out to new customers in a more focused, and perhaps more meaningful way. To be sure, many of the personalization options afforded by Card Lab Connect are ultimately superficial – each card, regardless of its design, comes with the same basic rewards program. The uniqueness of Card Lab Connect, then, is not inherent in the card product itself, but rather the scale at which the firm allows users to set up affinity-based rewards programs.
Student Banking Suddenly Hot
Remember college? Digging for loose change in the couch cushions, just to buy a burger? If anyone needs help with finances, it’s students, and in June a number of firms introduced new resources to help keep kids out of trouble, at least financially speaking.
Fifth Third Bank released a new series of videos on its website called “Don’t Be That Guy,” which highlight common financial mistakes that college students make, such as wasteful spending. Citizens Bank also added a new Tip Sheets for Students and Parents page to its public site that identifies twelve tips for managing money, financial aid and student loans. T. Rowe Price targeted a younger audience with its new Family Center sitelet, which features an interactive video game for children. Co-designed by Walt Disney Resorts, the firm’s video game teaches the basic principles for saving and managing money.
Big Mergers Continue to Move Forward
Wells Fargo announced on its joint blog with Wachovia that Wachovia Securities had officially been transitioned to Wells Fargo Advisors name. Accordingly, the Wachovia Securities public and private sites now feature Wells Fargo Advisors’ colors and logo.
Smith Barney and Morgan Stanley updated their respective sites with a new Morgan Stanley/Smith Barney logo. While both firms maintain separate private sites for their respective customers, a new Morgan Stanley/Smith Barney sitelet introduced this month offers general information and press releases regarding the new joint venture. |
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Written by Tim Ullrich
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Wednesday, 08 July 2009 15:14 |
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According to the Alzheimer’s Association, as many as 5.3 million people in the United States are currently living with Alzheimer’s disease, a figure that is increasing every year due to the growing population of elderly people. While the medical field continues to develop new drugs that increase the lifespan of humans, the financial and economic ramifications of a growing elderly population should be considered.
People stricken with this devastating disease often require some form of care giving; a responsibility most often shared among relatives. Those relatives are sometimes required to scale back the hours they devote to a job, or quit working completely, effecting their personal financial situation and the U.S. labor market. As a result, Long Term Care Insurance (LTC) was developed nearly forty years ago as a way to supplement Medicare coverage and help cover the exorbitantly high costs of nursing home and other private care.
While the LTC product has certainly helped many effected families cope financially with the cost of medical care, the premiums paid to purchase a LTC policy are certainly not inexpensive. Some people may never require the benefit of owning LTC coverage, and for them, any premiums paid into a traditional LTC policy are essentially lost. Enter the new LTC/annuity hybrid.
According to an article in the Retirement Income Journal, four companies – Genworth Life, United of Omaha, Bankers Life and OneAmerica – have thus far developed a product that is structured as an annuity, but offers a LTC rider that potentially covers the cost of medical care. If care is not need, the annuity will gain interest as a normal fixed annuity, paying out a specified monthly benefit. However, in the unfortunate case that nursing home care is needed, the LTC benefit rider will kick in to pay the costs tax-free.
Given the uncertain future of health care coverage in America, decreasing social security benefits and the overwhelming number of baby boomers entering retirement, the market for a LTC annuity hybrid is rife with potential. While the product is still in its developmental stages, those companies that can fine-tune and best market the LTC annuity will compete for a huge percentage of market share. |
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Written by Tim Ullrich
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Thursday, 02 July 2009 08:04 |
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When the dust settled on a tumultuous first quarter, the writing was on the wall for variable annuity issuers: adapt your product or continue to lose market share to safer, cheaper alternatives. According to LIMRA, U.S. variable annuity sales were down 27% compared to the first quarter of 2008. During the same period, fixed annuities outsold variable products by over four billion dollars, rising a startling 78% in contrast to Q1 2008 totals.
The response from firms was emphatic, resulting in sweeping changes to risky product features as well as the discontinuation of numerous VA products. Hit hardest were the popular VA living benefit riders whose gaudy guarantees became unsustainable as the economic downturn intensified.
Recently, we have seen the introduction of living benefit riders that lower risk on the firm's end. Firms are banking on the fact that reducing the cost of the riders will make up for the smaller up front guarantees and keep the riders enticing to consumers.
Pacific Life's recently released CoreIncome Advantage GMWB is an excellent example of this new breed of living benefit riders. The rider guarantees 4% withdrawals, as opposed to the industry average of 5%, and requires investors to hold off on withdrawing money until the age of 65. Normally, guaranteed withdrawals are made available at the age of 59 1/2. The rider comes at a significant discount to consumers (40 basis points) well below the average for GMWBs which is generally 85 basis points.
The rider's extended accumulation period provides added cushioning against market downturns; however, it severely limits the investor's liquidity and overall investment flexibility. From an advisor's perspective, the conservative nature of the rider's key features and delayed withdrawal period take away many of the product's traditional selling points. Only time will tell if the significantly discounted price will provide consumers and advisors with enough incentive to make these riders a success. |
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Written by Tim Ullrich
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Wednesday, 01 July 2009 10:04 |
 Rarely is a mutual fund firm's website synonymous with the word "entertainment," so T. Rowe Price has clearly gone against the grain by teaming up with Walt Disney Resorts Online to create the Great Piggy Bank Adventure online game. The new game is a good way for parents to introduce children to basic money management principles, allowing users to select a goal that can be achieved through earning and saving "truffles" (the game's monetary system) and making wise financial decisions throughout the game's multiple levels. Goal items include a pet rabbit, an art canvas, a toy helicopter, a tree-fort and a basketball hoop.
While the premise of the game and its animation are good, the goal items are questionable. Why not offer more realistic, long-term goals such as a first car or an exotic vacation? Or, if choosing a short-term goal is a must, why not pick items that are relevant to pre-teen children today, such as a Playstation or an iPod? It's also worth pointing out that none of Disney's major stars seem to make an appearance in the game, which may be a missed opportunity to broaden its appeal and leverage Disney's existing brand power.
While the game's goal items could be improved, this hardly renders the Great Piggy Bank Adventure a failure. On the contrary, it successfully communicates lessons about money management to children and adults alike in an entertaining way. Other financial services firms like ING Direct and Wells Fargo also offer these kinds of online games to children to encourage effective savings habits. We review all three in our soon-to-be published study, Consumer Financial Education Today: Best Practices. You can learn more about this comprehensive, cross-industry study by clicking here.
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Written by Tim Ullrich
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Tuesday, 30 June 2009 14:42 |
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This morning we took the opportunity to drop in on an Ignites webinar called "Social Media's Role for Mutual Funds." While the presentation did not focus specifically on the fund industry, it offered a number of useful takeaways for any financial services firm looking to dip their toe into the social media waters.The panelists, TIAA-CREF's Anne Detmer, VP, Enterprise Marketing and JP Morgan's Daniel Durst, Head of Institutions Marketing, talked about their respective companies' forays into the social media universe and commented on what they hoped to achieve by using this "cutting edge" technology. Ms. Detmer was the more enthusiastic of the two presenters and clearly seemed excited about the possibilities of social media. She described the thought process behind the launch of CREF's myretirement.org online community and their Facebook page and outlined some of the objectives of these services - participant retention, brand awareness among younger audience, joining the existing conversation about TIAA-CREF, etc. She also referred to social media as an educational tool that encourages conversation - a view we heartily endorse and a subject we address in depth in our new study, Consumer Financial Education Today: Best Practices.
Mr. Durst appeared to be a bit more skeptical. He described social media as an "opportunity and liability" and spent a good amount of time talking about compliance issues. He positioned social media as an addition to, but not a replacement for, traditional marketing initiatives and cautioned that bad news seems to travel much faster than good news in this medium. On the plus side, Mr. Durst did talk about the value of webcasts in organizing open discussions over the web and the ease in which companies can respond to complaints from clients and prospects using this technology.
The last few minutes of the conversation was dedicated to Q&A. While compliance once again came up, the panelists were also asked how they managed feedback and staffed positions that deal with social media. It appears that roles are not yet defined at either company, but people from all levels of the organization play a part in developing and fine tuning these applications.
Overall, it was an interesting exchange on a topic that continues to be top of mind for industry professionals. |
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Written by Tim Ullrich
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Wednesday, 24 June 2009 16:05 |
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Recently, I've noticed that a lot of consultants seem to be hosting webinars to help financial advisors understand how to leverage social communities like Twitter and Linked-In to build their businesses. While these webinars might be useful to those who are new to social media, most address only the most basic aspects of these different platforms. Many gloss over the regulatory risk inherent to these tools. I found this somewhat disturbing since many of the financial institutions we’re in contact with have cited FINRA rules as a barrier, if not the barrier, to their adoption of a social media strategy.
On Sunday, Investment News published an interesting article entitled, “A Warning Before You Twitter,” addressing the compliance issues advisors face when participating on these sites. Reiterating many of the same concerns we've heard from our clients, the article suggests that, while it may be possible for advisors to use these tools in a responsible and legal fashion, pre-approval requirements make spontaneous communication difficult, which detracts from the value of participation.
That's not to say that financial institutions can't benefit from social media - hardly; we presented several success stories in our Social Media report recently. Still, firms must tread carefully, considering the compliance implications every step of the way as they develop and implement their social media strategy. Industry consultants and the firms they serve cannot turn a blind eye to these issues. |
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