As millions of baby boomers are nearing their final working years and millennials are starting families, safe retirement options are likely to increase in popularity.

Knowing retirement is on the mind of most generations that are currently in the workforce, it’s important to consider how to leverage this information with your clients to position a safe, yet profitable, investment vehicle, such as a guaranteed insurance stable value fund.

Guaranteed insurance stable value funds are a great product to recommend for clients to include in their 2017 plan offerings, as they provide safety and low volatility to investors, but can also generate higher returns.

As a plan consultant, if you already offer a guaranteed insurance stable value fund to your clients or are thinking about adding one to your investment lineup, make sure to understand all of the fund’s features and restrictions.

Here are nine critical proof points to help you evaluate guaranteed insurance stable value funds in order to provide the best recommendations to your clients:

1. Stable value contract and product review

Plan sponsors need a clear understanding of the contract and product features prior to selecting a guaranteed insurance stable value fund.

As a plan consultant, understanding and analyzing the different products and contractual terms is vital so you can provide options for a product that best fits a plan sponsor’s needs.

2. Portfolio management review

In order to sell guaranteed insurance stable value funds, you must research how each company’s portfolio is invested. Ensure that the goals, objectives and structure of each portfolio are clearly defined and followed under the investment guidelines.

The more in-depth product knowledge you have, the more confidence and trust you’ll build.

3. Underlying assets evaluation

Prior to your next client meeting, conduct an in-depth analysis, review and evaluation of the underlying investment characteristics, including credit quality, asset allocation, risk and fund performance.

Be prepared to answer plan sponsors’ questions regarding risk and reward characteristics that would result in any variance between the market value and book value of the fund. Predicting client concerns and being prepared with supporting product information and examples will demonstrate your commitment to serving them.

4. Fund diversification

Given that a guaranteed insurance stable value fund’s unit price can be subject to changes in both the credit market and market interest rates, portfolio diversification is an important factor to analyze among product offerings.

Listen to the needs of your clients’ employees and, in your meeting, discuss which product diversification strategy could help satisfy those goals.

5. Wrap provider review

Conduct a complete review of the wrap structure, including the creditworthiness of wrap providers, wrap capacity of the fund and wrap limitations to ensure you’re offering a strong investment lineup.

Additionally, you should assess wrap-issuer investment guideline changes, crediting rate methodology, exceptions to stable value guarantees, withdrawal restrictions and contract termination provisions. Discussing a wrap provider’s product restrictions can help you set realistic plan sponsor expectations of the offering.

As part of your analysis, it’s crucial to also research the issuer’s financial strength and their commitment to the stable value marketplace. With recent money market reforms and political changes, it can be mutually beneficial for you and the plan sponsor to offer a stable value fund through an insurance company that is an active participant in the marketplace and that can offer stability and security through these uncertain times.

6. Wrap provider stability

Ultimately, the financial stability of the wrap-contract provider(s) may factor significantly into the fund’s ability to continue to make payments at book value — especially if that value is greater than the fair market value of the underlying assets.

Understanding the contractual fund guarantees will help you build a stronger investment lineup as well as help you provide reliable product offerings.

7. Fair market value-adjustment provision

Most stable value funds contain a fair market value adjustment provision for certain plan sponsor-initiated events. Under this provision, plan participants may not immediately receive the book value of their investment if the market value of the investment is less.

Addressing this provision upfront could help garner confidence and trust with your clients.They will appreciate you have done your research and are going to extra lengths to highlight strengths and weaknesses of different product offerings.

8. Define plan sponsor-initiated events under an adjustment provision

Understand what plan sponsor-initiated events entail, how each works with every book-value guarantee provider, and know the potential implications that could affect plan participants.

It can be overwhelming for plan sponsors to read through contractual insurance jargon and try to make sense of product provisions. If you can put product provisions and limitations into digestible terminology for clients, it will be easier for them to understand the product, giving you a stronger chance of turning leads into sales.

9. Restrictions on participants’ ability to move assets from the fund

Some funds prohibit participants from moving assets directly into a “competing” fund, such as a money market fund. This is an important product feature to be aware of when consulting with plan sponsors regarding which guaranteed insurance stable value fund is right for their employees. Make sure to discuss such product restrictions, if applicable, with plan sponsors. Your clients will appreciate the transparency and it could help prevent unexpected surprises down the road.

Applying these nine proof points to research and learn more about various insurance company offerings can show clients you’re well-versed in the industry and are invested in finding the right product to help their employees with retirement readiness.

Instant Insights /

9 proof points to help evaluate a guaranteed insurance stable value fund

More From HR Executive

Related Stories

Recommended For You