Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

1st Quarter | 2024

Quarterly recap



Current market environment performance of dynamic, risk-managed investment solutions.

By David Wismer

If social media is any indication, this summer’s must-see double feature is “Barbenheimer”—the nickname referring to “Barbie” and “Oppenheimer,” the two blockbuster movies of the season.

According to the BBC, “One is a wacky postmodern comedy about a range of dolls known for their bright pink clothing. The other is a brooding biopic of the scientist who built the atom bomb during World War Two. … At first glance, Greta Gerwig’s Barbie and Christopher Nolan’s Oppenheimer could hardly appear more different, and yet the two films are so closely linked that they have spawned a portmanteau name, much like two celebrities in a tabloid-friendly relationship. This is the summer of Barbenheimer.”

“Barbie” has surprised many in the media and movie industry with its success. The story, which is centered around the world of the well-known children’s toy, has found global appeal not only among pre-teens and teens but also adults. In terms of box office numbers, “Barely three weeks into its run, writer-director Greta Gerwig’s blockbuster has raked in an astounding $1.03 billion at the global box office, according to official Warner Bros. estimates. This makes Gerwig the first solo female director with a billion-dollar movie.” (After this past weekend, the global total is now $1.18 billion.)

In comparison, “Oppenheimer” has “earned another $31.9 million for a huge worldwide total of $649 million, making it Nolan’s fifth-biggest film.”

Looking at Rotten Tomatoes, “Barbie” has an impressive audience score of 84%, with verified viewers rating it 4.3 stars out of 5. Pretty amazingly, “Oppenheimer” surpasses those numbers, scoring 91% and 4.6 stars. (You can see trailers for each movie at Rotten Tomatoes.) Based on these numbers, and the directors and casts involved, my wife and I look forward to seeing both movies when they finally come to a streaming service we subscribe to.

A movie about retirement-income planning?

A Florida-based team of advisers recently told me about what they consider a must-see movie for their clients. It’s not a current release, but it has been gaining some traction over the past two years.

“The Baby Boomer Dilemma” claims to be “The first MPA-rated film on retirement income” and was released in late 2021. It’s primarily distributed via paid download. Financial advisory firms have also sponsored viewings in theaters or the firm’s offices.

Although it does not have a Rotten Tomatoes rating, the site described the film pretty concisely as “a dive into the retirement system in America and the issues surrounding it, with opinions from some of America’s foremost economic minds.” Those interviewed in the film include Nobel Prize winners, leading academic figures, and prominent individuals across the public and private sectors. A good summary of the film appeared in early 2022 in the Retirement Income Journal. You can see the official website and trailer here.

I watched the film this past weekend, found it thought-provoking (though somewhat hyperbolic), and also learned a few things I was not fully aware of. One notable disclaimer: the film is heavily weighted toward making the case for one particular “retirement income solution,” supporting annuity strategies as the logical choice for creating an income stream (plus Social Security) for pre-retirees and retirees.

This disclaimer is important, especially in the context of findings from Flexible Plan Investments’ recent article and white paper, “The hidden cost of fleeing from equities to CDs and fixed-rate annuities” (the white paper is for financial professionals only). Investors are often tempted to abandon equities for the “certainty” of fixed-term investments such as CDs or fixed-rate annuities—especially in periods of high market volatility and/or when relatively higher yields are available. The study demonstrates that such a shift, often driven by investor fears, can lead to substantial opportunity costs over an investor’s lifetime, reaching into the millions of dollars. The study further suggests that working with a financial adviser who implements active strategies can help manage portfolio risk effectively, ultimately providing a more successful approach than resorting to fixed-duration investments.

So, while this is not an endorsement of the film’s conclusions, several issues raised in the film are relevant in today’s discussion of retirement planning. (See an informative Yahoo Finance article on potential Biden administration proposals to revamp 401(k) tax credits.)

These issues include the following:

• Do most American workers focus too much on “accumulating wealth” and not enough on risk management of their investment assets and planning for “decumulation”—that is, how they will fund a retirement income stream?

• Related to this, do most workers truly have the financial education and preparedness to manage one of their biggest retirement assets, a 401(k), on their own? (“You give the burden of planning retirement and place it upon the shoulders of the person who knows the least.”)

• Can Americans count on Social Security solvency in the future? Is there a real threat of benefits being reduced?

• Are those planning for retirement aware of and preparing for possible “sequence of returns” issues for their retirement assets, with the “red” or “danger” zone being the five years before and five years just after retirement? (“There’s got to be a better way to try to save for retirement than using something where half your money can disappear almost overnight.”) 

• Do annuities deserve the tarnished image they have in some corners of the financial industry? Do most people really understand what an annuity is all about and how different annuity strategies can work?

How is this information relevant for advisers and their investor clients?

I asked the president of that Florida advisory firm why they were planning on holding a number of sponsored screenings of “The Baby Boomer Dilemma” for clients and prospects.

He said there were three outcomes he hoped to achieve: (1) providing valuable client education and follow-up discussion as part of his firm’s ongoing outreach and client-engagement programs; (2) facilitating the conversation about his firm’s ability to provide third-party investment management of client assets held within 401(k) and 403(b) voluntary retirement plans; and (3) opening client minds to why annuities might be a suitable part of an overall customized retirement-income plan.

How FPI provides solutions via self-directed brokerage accounts (SBDAs)

I think one of the most important themes of the film is the issue of how 401(k) or other voluntary plan participants are being asked to effectively manage their own investment portfolios with limited personal investment knowledge and the susceptibility to making decisions influenced by behavioral issues. Yes, they receive information from plan sponsors on the administrative elements of their plan and the available investment options. But that hardly qualifies as professional guidance in making important investment decisions year after year.

Since 2004, Flexible Plan Investments (FPI) has been offering managed investment solutions for advisers who work with plan participants in 403(b), 401(k), 401(a), or 457 plans. Today, 12 actively managed funds are used to deliver different risk-managed strategies in separately managed accounts designed to be used within a self-directed brokerage account (SDBA).

Plan participants at many companies or within the public sector can ask their adviser about the ease of using the SBDA option. By doing so, they can add a dynamically risk-managed separate account to their workplace retirement account. This separate account provides a gateway to the same management styles as high-net-worth investors, institutions, and foundations, giving investors more tools, an enhanced risk-management approach, and professional guidance to help them reach their retirement funding goals. (You can learn more here.)

The bottom line

Having a knowledgeable and professional advocate for retirement investment planning takes away the burden for plan participants of making difficult investment decisions each year on their own. In addition, employing risk-managed strategies that have an active, responsive defense mechanism can help keep a severe bear market from derailing a plan participant’s portfolio and progress toward their goals.

I think this can be one important, or “must-see,” answer to the “dilemma” faced by many people who are actively planning for retirement today.

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