Value-Added Deliverables – The RIIA Retirement Income Expert (RIE) Certifications and Designation

Francois Gadenne has graciously agreed to cover for me until my return on May 16. He will be contributing a variety of essays addressing contemporary and future retirement income opportunities and challenges.

Education is one of RIIA’s most important missions. The Education Committee, chaired by Ron DeCicco (RBC) and supported by John Carl (RLC) as a service provider, directs the training, certification and designation activities. Our educational focus is the Financial Advisors (FAs). Tomorrow’s post will describe the various types of professionals generally described as FAs. Our goal is to help all types of FAs solve their clients’ income planning concerns in retirement.

Starting as soon as RIIA’s official foundation, the Education Committee developed a training program as the kernel of an annual designation program and the first step of RIIA’s Retirement Income Expert designation. Some members also license the training and certification material for their internal training programs.

Our training, certification, and designation programs are organized by levels. There are four levels. Level I was taught in public classes starting in the Fall of 2006. Verbal and written reviews have been enthusiastic. Deeds have been even more impressive as some students joined the Committee to participate in the creation of the next levels. Levels II, III, IV are under development and will be rolled out later in 2007.

The “View Across the Silos” gives RIIA a unique opportunity to combine the latest academic research with practical techniques that span the many silos of the financial industry. In addition, our academic Special Advisors to the Board come from universities across the nation. Levels and Sections are built with input from a broad range of the best academic and industry specialists.

By the conclusion of RIIA’s certification and designation program, financial advisors will

  • understand their clients’ retirement needs and concerns, their goals and aspirations
  • be aware of the many products, tools and services available as well as the regulations, rules, and laws that apply
  • know how to structure retirement income strategies based on individual client situations
  • understand the requirements of a financial planning practice focused on clients with retirement income needs

Each level includes formal teaching material, case studies and tests on the following topics:

  • Level 1: Delivering Retirement Income Solutions
  • Level 2: Planning Considerations (e.g. income, health, tax, estate)
  • Level 3: Repositioning and Converting Assets into Income for Retirees
  • Level 4: Practice Management

RIIA monitors certifications on an annual basis. Issued certificates identify both the Level and the Year the level was taken in order to maximize incentives for and the value of continued education and professional development.

If you have an interest in the Education Committee’s work, please contact Ron DeCicco or John Carl directly. You can find their phone and e-mail address at

RIIA’s Volunteer Organization and the Committee Structure

Francois Gadenne has graciously agreed to cover for me until my return on May 16. He will be contributing a variety of essays addressing contemporary and future retirement income opportunities and challenges.

Committees are at the heart of RIIA’s culture. RIIA is first and foremost a volunteer organization.

The Association started when a few clients and prospects of Retirement Engineering made it clear in 2005 that it was time to start a new trade group for the emerging Retirement Income Industry. The topic was important to the future success of their businesses, they believed the need was urgent and they were prepared to allocate a budget towards it. By the time of RIIA’s kick-off meeting on February 1, 2006 in New York City, the Association had 30 Founding Members. Sixteen months later, the Association is about three times its original size.

I have been involved with start-ups before and after the Internet.

Before the Internet, an important rate-limiting factor to setting up a business was the phone system. Private Branch Exchanges (PBXs) were expensive and necessary. The need to share this expensive equipment led to the creation of “incubators” where start-ups shared office space and, most importantly, a fully functional phone system.

Monthly rents ranged from hundreds to thousands of dollars per office. To start something of a reasonable size, you needed a few million dollars in seed capital.

The Internet gave us cheap communications, including e-mail as well as voice-over-Internet-Protocol (VoIP). Cheap communications changed the economics of start-ups. It was possible to do more and to project greater business presence at a much lower cost.

The incubator business model changed too. Start-ups no longer needed to move all of their employees to a central location to have a business-grade phone system. Many incubators failed to adapt to that changing reality.

Interestingly, REI’s co-founder, Ben Williams, points out that PBXs still exist, but the form has changed to self-service (direct dial of extensions, directory lookup, etc.) similarly to how the phone system itself changed about 70 years ago with the advent of the dial and the crossbar switch. I also suspect that the cost is a fraction of what we paid in the 1980s and 1990s.

Post Internet, managing a start-up feels a lot less about office administration and a lot more about network management.

Networks are built from nodes and links. Some networks can be built around a few highly connected nodes (called “hubs”). If you can provide these hubs with a shared direction, networks are able to accomplish specific business goals, grow indefinitely, function effectively at multiple organizational levels and withstand considerable stress. These are called scale-free directed networks. RIIA is such a network.

Committee Chairs are RIIA’s core organizational building blocks. When a Committee starts at the request of interested and motivated members, the Chair (with Board approval) sets the direction in a written mission statement. Successful Chairs increase their effectiveness as network “hubs” by becoming highly connected with members of their Committee, other RIIA Committees and a full range of outside service providers who help accomplish the mission. The successful chair becomes a band leader rather than a musician. The written mission statement provides consistent direction as the Committee grows.

At this point, RIIA has nine Committees. The Board provides direction to the Committees with four categories of association-level objectives:
- Growing Membership
- Increasing Visibility
- Delivering Value-Added
- Setting Industry Standards

The current Committees and their respective Chairs/co-Chairs include:

Growing Membership
- Membership Committee
o Rick Nersesian
o Elmer Rich

- Employment Survey Committee
o Laura DiFraia
o Garth Bernard

Increasing Visibility
- Communications Committee
o David Macchia, Chair
o Will Prest, co-Chair

- Programs Committee
o Paul Fichera, Chair
o Keith Piken, co-Chair

- Awards Committees
o Sean Hanna, Chair
o Charlie Ruffel, Chair
o Suzanne Siracuse, Chair
o Bob Tyndall, Chair

- Noted Authors Committee
o Jerry Bramlett, Chair
o Greg Cherry, co-Chair

Delivering Value-added
- Education Committee
o Ron DeCicco, Chair
o John Carl, Service Provider

- Research Committee
o Kathleen Beichert, Chair
o Chris McNickle, co-Chair
o Larry Cohen, Service Provider
o Elvin Turner, Service Provider

Setting Industry Standards
- Methodologies Committee
o Richard Fullmer

- Compliance Committee
o Joan Boros

If you want to learn more about RIIA’s Committees, please contact the Chairs directly. Their contact information is available on RIIA’s website at .

How RIIA Recognizes and Encourages Industry Adaptation: The RIIA Awards

Francois Gadenne has graciously agreed to cover for me until my return on May 16. He will be contributing a variety of essays addressing contemporary and future retirement income opportunities and challenges.

Last week, it became clear that it is too early to pick the retirement income winners. Differentiation is still going on. Market selection is still at a very early stage.

We also saw that a shared challenge for retirement income competitors is to avoid dead-ends. By dead-ends, we mean manufacturing and distributions models that are not favored and selected by the market.

In a meaningful way, we stand on the shoulders of business giants who came before us and avoided dead-ends. Now, we are depending upon our own efforts for future success. What will be our path?

Thinking about paths, you probably noticed that Monte Carlo analysis has become quite popular in the industry. Monte Carlo analysis is a probabilities-based simulation method that can be used to paint a large number of possible paths over a given space. For instance, we can simulate the many paths of returns for a risky asset or the many paths of our customers’ spending patterns.

This notion of path is important. Of all the paths that our businesses can follow, how and when do we know that we are on a winning path? If business success comes from making decisions that keep us on the better business life-paths, how and when do we know that we are following one of our best possible paths?

A daily task for business leaders is to determine if their perceptions are objective and verifiable or if they are subjective projections of their inside-the-box biases. One way to evaluate the goodness of the path that we are following is to look around and to benchmark ourselves against the right number and the right types of competitors. There are many existing benchmarks that we can use if we are focused on accumulation and investment returns. What are the benchmarks focused on retirement income?

The RIIA Awards are designed to deliver independent, objective and cross-silo benchmarking.

In particular, RIIA’s 2007 Awards focus on efforts and contributions that are most helpful to Financial Advisors (FAs) who find themselves “between chairs” during the industry’s transition from Accumulation to Income Distribution. RIIA brings valuable benchmarks to all of its members by recognizing and encouraging institutions that have delivered exceptional efforts and contributions on our collective path of adaptation from Accumulation to Retirement Income.

These Awards, and the judges include:

  • RIIA’s Practical Research Award.
  • This Award is part of the Communications Conference that will take place during the afternoon of RIIA’s 2007 Annual Meeting and Awards Dinner (September 17, 2007 at the Royal Sonesta Hotel in Boston).
    Bob Tyndall from Research Magazine chairs the Award Committee.
    The Committee is looking at recent academic research to identify, from an FA’s point of view, what published research was most practical and useful during this “between chairs” transition period.

  • RIIA’s Advertising Award.
  • This Award is part of the Awards Dinner on September 17.
    Sean Hanna from InvestmentWires chairs the Award Committee.
    The Committee is looking for the most creative and motivating advertising in the retirement income space. The Awards will go to both the advertiser and to the creative agency.

  • RIIA’s Retail Communications Award.
  • This award is also part of the Awards Dinner.
    Suzanne Siracuse from Crain’s InvesmentNews chairs this Award Committee.
    This award will recognize the best in printed materials aimed at planners who prepare themselves and their practices to help clients as they move from accumulating assets to the withdrawal of those assets in retirement. Awards will be made in two categories: Printed materials and new media.

  • RIIA’s DC Communications Award.
  • This Award is also part of the Awards Dinner.
    Charlie Ruffel from Asset International chairs the Award Committee.
    This award will recognize the best in printed materials aimed at DC planners who prepare themselves and their practices to help clients as they move from accumulating assets to the withdrawal of those assets in retirement. Awards will be made in two categories: Printed materials and new media.

    RIIA’s membership is still open and we look forward to your participation. If you want to join one of the Awards Committees or if you want to submit material for the consideration of the Committees, please contact the Committee Chairs directly by checking Committees webpage on RIIA’s website,

    The Frustrations of Transition: Giving Advice Today While Sitting Between Chairs

    Francois Gadenne has graciously agreed to cover for me until my return on May 16. He will be contributing a variety of essays addressing contemporary and future retirement income opportunities and challenges.

    We saw yesterday that the retirement income industry may be in the early stages of a rapid differentiation phase of an evolutionary change process.

    We also saw that this process may be propelled by an irresistible grassroots change caused by the demographics of the Baby Boomers.

    The analysis of this (variously called) “tectonic”, “seismic”, or “sea-change” demographic situation and its implications is no longer controversial. Actually, it may even be fast becoming the consensus.

    Our common and greater challenge today is how to position our businesses on the winning side of this change. Both manufacturers and distributors need to make hard-to-reverse decisions over the next years. The constant worry in the back of our mind as we look at the various choices: How do we avoid dead-ends?

    While this change process will unfold over time, many who need to give investment and retirement income advice to investors feel that they are sitting “between chairs”. The old Accumulation products no longer look adequate. The Retirement Income products have not all appeared yet. We do not know who the winners are. We may not know for a while.

    What can we do?

    A good answer to difficult questions always seems to be: “It depends.”

    Indeed what we can do depends in a large measure on the characteristics of the specific market segments that we serve.

    If our market is the top-end of the High Net-Worth (HNW) segment, much of the retirement income discussion is irrelevant. The clients’ assets are many tens of times higher than their annual expenditures. Accumulation focused and efficient asset diversification advice continues to makes a lot of sense for many, if not most, of them. Legacy issues are their next significant concern.

    As our clients move from HNW towards the Affluent and the Mass Markets, the retirement income discussion becomes increasingly relevant. This is where we meet the pressing advice needs of client cohorts that cannot wait until the retirement income winners become clear.

    This is also the focus of RIIA’s September 17, 2007 Annual Meeting and Awards Dinner.

    RIIA organizes its meetings around core topics and themes that appear most important and most urgent to the its members. RIIA’s 2007 Annual Meeting and Awards Dinner is organized around the following theme:

    • How can the retirement income industry best help the Financial Advisors (FAs) during this “between chairs” transition from managing probabilistic accumulation investments to servicing retirement income consumers?

    With a special focus on customer-facing communications, RIIA’s 2007 Annual Meeting and the Awards Dinner seeks to answer the following questions:

    • What can FAs do to improve customer communications during this transition?
    • What else can FAs do during this transition?
    • What can FAs do to prepare for what happens after the transition?
    • What can RIIA members do to support a timely and appropriate industry adaptation?

    To add your voice to the discussion, join RIIA or attend the 2007 RIIA Annual Meeting and Awards Dinner on Sept. 17 at the Royal Sonesta Hotel in Boston. Better yet, do both.

    A model to Understand Change in the Retirement Income Business: Differentiate, Select, Amplify

    Francois Gadenne has graciously agreed to cover for me until my return on May 16. He will be contributing a variety of essays addressing contemporary and future retirement income opportunities and challenges.

    Yesterday, we wondered if traditional retirement income offerings looked too complicated from the investors’ point of view.

    We also wondered if the investor was becoming more of a consumer as their needs and wants are shifting from accepting Probabilistic Accumulation to expecting Reliable Income.

    To answer such questions productively, it is important that we have a common view of the broader context, starting with a shared understanding of how change happens in business. Having an explicit model of change will help us with finding answers in our continued exploration of these, and other, questions.

    Evolutionary change is a model of change that has great explanatory value for business and industry development. Products and companies are born, many fall by the wayside, a few thrive but eventually they too will fall by the wayside and will be replaced by others. Recent news story about the fall of GM and the rise of Toyota come to mind.

    For our purposes let’s focus on the following iterative three-step evolutionary change process:

    - – Differentiation

    - – Selection

    - – Amplification

    Differentiation is the first step where many solutions appear in close time proximity to one another to responds to exploitable changes in demand. Who the winners will be is far from obvious during this period. For instance, it was not easy to find the early winners when we moved from horseback riding to car driving.

    This was true at many levels of observation. Early motive power technology included steam, electrical, diesel, and gasoline. There were scores and scores of car companies. Henry Ford failed before he succeeded.

    Placing a bet on the winning technology, let alone the winning competitor, was not an obvious thing to do at the beginning of the transition. There was great differentiation. A thousand flowers bloomed.

    During the next step and following the initial differentiation bloom, the market selects the winners. We no longer use horses for daily transportation needs except perhaps in a few places in Pennsylvania. We no longer see steam-powered cars. Electrical-powered cars may or may not become the next generation but certainly they were not the winning generation then. I was born in France and there was a brewery called “Le Coq Hardi” in front of my house. Every morning in the 1960s I would see horse-drawn carts AND electric cars leave the factory to bring the beer to the customers’ door step. Eventually the electric cars went away (so did the horses) when the brewery closed.

    In specific situations, once the market selects a winner, the winner takes it all. This is a lesson that we saw in real-time during the Internet Boom. We still see it today, just take a look at Google. The success of the winner is amplified in both growth and profitability until it too reaches a limit.

    Where do you think our retirement income industry is in this three-step change mode?

    - – Are we at a time of product and process differentiation?

    - – Are we at a time of market selection?

    - – Are we at a time of winning amplification?

    While it is dangerous to confuse metaphor with actual observation, where are our horses, steam, electrical, diesel and gasoline powered offerings? Where are our Henry Fords?

    Interestingly, we will most likely not anticipate it correctly until after the market selection has become clear for all to see. Have we not all seen our share of innovations that did not work because our view of reality was not the choice of the market? Who among us bought Betamax, because it was the better technology, over VHS?

    In our own space and back to last week’s discussions at the PRC, we may think that the investor should prefer strategies that provide larger monthly income payments but what if the record shows that they actually favor taking lump-sums?

    I certainly do not know the answers but we can take comfort in the following observations:

    - – This cycle of change was started by the changing demographics of investors. These changes are a grassroots, bottom-up movement that the industry cannot stop. These changing investors may even want to be treated like consumers.

    - – It is too early to pick winners. The market has not spoken yet. We even suspect that the larger number of differentiated innovations has yet to come to market. These are frustrating times for those among us who need to give advice today. It feels as if we are sitting between chairs. What are the right questions to ask to avoid leading our companies towards complicated dead-ends?

    - – It will take several years for the differentiation and market selection phases to play out. Still we expect to be taken by surprise once things get rolling. These changes are non-linear processes. Nothing seems to happen for a long time. Then, all the sudden, a new manufacturing and distribution model emerges, seemingly out of nowhere.

    The Change Agent’s Greatest Fear: “It Looks Complicated”

    Francois Gadenne has graciously agreed to cover for me until my return on May 16. He will be contributing a variety of essays addressing contemporary and future retirement income opportunities and challenges.

    Yesterday, David wrote a kind introduction to my guest-blogging while he is traveling. It is a good thing to be a guest-blogger since you get to choose your topics. I will take advantage of this opportunity to write about topics that are important to the Retirement Income Industry Association (RIIA).

    As you know from my April 3, 2007 interview on this blog, RIIA was started at the request of clients and prospects of Retirement Engineering Inc. (REI). Several investment, insurance and distribution companies were actively looking for a place where they could have a sustained retirement income discussion across their traditional business silos. Their need was strong since initial discussions suggested that the changes involved were likely to exceed the traditional business silos’ incremental, inside-the-box adaptation expectations.

    RIIA members benefit from “The View Across the Silos” since the membership includes leading firms from all nine industry cells shown in the Opportunity Matrix. (See the 2006 White Paper that you can download from the RIIA website ).

    This “View Across the Silos” informs the membership’s discussions as well as the Committees’ work. It also gives members a unique perspective on the latest retirement income developments across most of the financial industry, including established institutions as well as start-ups.

    Established institutions are successful and thrive because they are able to exploit a specific economic opportunity at a specific time and at a profit. Success means economic efficiency. Efficiency means loss of flexibility. Loss of flexibility creates an upper bound on their ability to change. Incremental change can be accommodated. Large changes often exceed their incremental ability to change.

    This loss of flexibility creates a space where start-ups can emerge. Eventually the start-ups that survive develop ways to exploit their own opportunity most efficiently and thus begin to loose their flexibility. This cycle creates the conditions for the next generation of start-ups as the market moves to create new opportunities that exceed the adaptation abilities of the established players.

    It is not a surprise that change generates fear within established institutions. Survival may be at stake if the required changes exceed what can be achieved with incremental adaptations.

    On the other hand, what are the fears of the change agent who deals with out-of-the-box changes? Among the many fears that we can think of, what in particular does the change agent fear the most? To understand this greatest fear, we turn to a code word used in the venture capital industry to express grave doubts about the viability of a potential deal: “It looks complicated”.

    If something looks complicated, there may be less complicated ways to create the effect. What looks complicated also looks less plausible. This is the greatest fear: Becoming too complicated to survive.

    At the invitation of Olivia Mitchell (Professor of Insurance & Risk Management at the Wharton School of Management and Executive Director of the Pension Research Council) and John Ameriks (The Vanguard Group), I joined a panel at last week’s Pension Research Council meeting in Philadelphia. At one point, the discussion turned to the visible complexity of traditional retirement income products, especially annuity-based retirement income products. My discussion point focused on the fact that looking complicated can be good or bad depending upon where the complications are.

    If the offering look complicated to the investor, we are likely to have a problem. What type of offering do you think is most likely to receive broader market acceptance: A complicated offering or one that can be understood simply and intuitively by the investor?

    On the other hand, it the offering looks complicated to the manufacturer but simple to the investor, this is most likely a good thing. It justifies the manufacturer’s pay at a minimum. It is also an expression of the value-added provided to the market. It was widely agreed that current retirement income products are indeed complicated both from a manufacturer’s and from an investor’s points of view.

    Two specific questions came up during the discussion:

    • Should retirement income offerings look simpler from the point of view of the investor than they currently do?

    • Are Accumulation-focused investors turning into consumers of Reliable Income?

    Let me know what you think about these questions. They have interesting implications that we can explore over the next few days.