Reducing anxiety about retirement

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Beyond the Challenge is a podcast where executives in the insurance and financial services industry share their insights and experiences. Hosts Kevin and Sandy Dougherty talk with today’s top business leaders about what keeps them up at night and the biggest opportunity organizations can capitalize on today. We encourage you to listen, share, and subscribe to our program.

Kevin and Sandy Dougherty each have over 20 years of experience in insurance and financial services, corporate leadership, and executive search. They’re the owners of Global Corporate Solutions and Global Corporate Leaders. Global Corporate Solutions partners with organizations to gain efficiencies and contain costs. Global Corporate Leaders partners with organizations to enhance and evaluate talent.

Beyond the Challenge podcast is sponsored by Exactuals, perfecting payments and the data driving them; Techficient, transforming the protection journey with intelligent data and machine learning to drive better outcomes; and JourneyGuide, improving your clients’ retirement outcomes through interactive planning software.

Welcome to Beyond the Challenge. Here are your hosts, Kevin and Sandy.

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Kevin: Today, we’re talking with Steve Scanlon, Managing Director and Head of Individual Retirement at Equitable, about the trends, challenges, and opportunities he sees for the retirement and insurance industry. Steve is responsible for the strategy of Equitable’s Individual Retirement business, including distribution, product, inforce portfolio, M&A, capital and strategic relationships. Steve, can you tell us a little bit about yourself and how you got into the retirement insurance industry?

Sandy: I can and good morning to both of you. Thanks for having me. You know, I started off in the business as a wholesaler down in Texas in the mid-90s and did that for about eight years, loved it, had a lot of success down there and really got into the annuity space at that time but really wanted to expand my knowledge and my background into asset management, so in 2003, I joined AllianceBernstein and throughout my career at AllianceBernstein, I held several leadership positions there. I was on their wealth management side, I was in their defined contribution side and ran that business and then I ran our subadvisory business as well so kind of moved around a lot there. And then, in 2014, I started a company called GuardVest, did that for three years, it was a startup fintech company, and then in 2017, I joined Equitable as the head of group retirement so all of our 403(b) and 401(k) business, I ran that business. And then in the spring of 2021, I became the head of individual retirement, so sort of full circle back into the annuity space.

Steve: Thanks, Steve. All industries face challenges, but the retirement landscape seems especially challenged right now. With inflation, changing interest rates, and new tax laws, consumers preparing for retirement are more anxious and they need help. How is Equitable helping Americans reduce their anxiety about retirement? 

Steve: It’s a great question. Obviously, very topical. Anxiety is often driven by fear, as you mentioned, and I think the reality is that there’s a lot going on that people are worried about and some things haven’t been around in quite some time. I mean, we haven’t talked about inflation in over 20 years, we haven’t talked about rising interest rates in over 20 years, and those things are now creeping into people’s portfolios and so, for a very long time, a standard sort of 60-40 portfolio, 60 percent equities, 40 percent bonds, the bonds were there to protect the volatility of the equities. I think everybody generally understands there’s volatility in equities. I don’t think a lot of people understood that there’s volatility in bonds when interest rates go the other way because it’s been so long. So we’re in the protection business so we are here for people that say, “I need to be invested because I’ve gotta fund this retirement that could last 30 years, but I want to feel better and sleep at night,” and that’s what we do. That’s what we provide is the ability to keep people invested and allow advisors to use annuities as a tool to help investors get what they need to do, which is to stay invested, but also deliver what they want, which is that comfort to know that I’m going to have guaranteed income or I’m going to have protection from volatile markets or I’m going to be able to use tax deferral to outpace inflation. So this is kind of our time. This is when annuities really resonate with advisors and certainly with clients because of the fear that’s out there driven by all the different things that we’ve got to face right now. 

Sandy: So do you see annuities playing a larger part in the retirement space over the next three to five years than they have in the past number of years? 

Steve: I do, for sure. And, in fact, the annuity business grew overall this year and so we’re already seeing that kind of in the numbers that people are starting to come back to annuities. And I think that’s for a couple reasons. One, we haven’t seen this kind of volatility since 2008. Inflation we talked about, interest rates we talked about, but you got 10,000 people turning 65 every single day so a lot of people that are leaving the workforce that are now saying, “I’m retired but I can’t let my money retire so how, again, can I strike that balance where I can say I wanna be invested and have my money work harder but I can’t afford a major disruption in the returns,” and that’s where annuities come in. And I think you’re also seeing advisors saying, “Let me revisit annuities,” because, now, again, my fixed income portfolio isn’t necessarily the one that’s keeping everything protected because it’s also been hit this year as well. So we like to think of annuities as more of an asset class for protection versus a product. So it’s a way for people to go in and say, “I wanna protect my portfolio, make sure I’ve got income in retirement or I’ve got downside protection against rising taxes, inflation, and things of that nature.” So we’re seeing advisors come in and use annuities as a protection and it’s kind of its own asset class. 

Sandy: I’m going to give you a follow up on that. There’s a lot of different types of annuities, you got your variable, your index, your immediate, again, you’ve got different types. With the rising inflation and rising interest rates, do you see people moving back toward a variable or with the volatility market going towards an index? Where do you see people moving with annuities? 

Steve: You know, here’s what I think is great about the business and that is that if you hadn’t looked at an annuity in 10, 15 years, which, candidly, a lot of people haven’t. I mean, the market’s been pretty darn good since 2009 so we haven’t really necessarily had as many of your clients asking for protection. What’s changed and I think perhaps the biggest surprise for advisors that haven’t looked at these in a while is that you can customize it. So the answer is, if you think about how an advisor works with his or her client, they sit down and talk to them about what do you need, what are we worried about in your portfolio. Annuities used to be one size fits all, like, “We’ve got this and it does this and it does that,” it was kind of the Swiss Army knife. Now, it’s really laser focused on what the challenge is. So, as an example, if a client is saying, “Hey, I funded my 401(k), I funded my IRA, I just wanna put more money away tax deferred but I don’t need a death benefit, I don’t want a living benefit, I just want low cost tax deferral.” You can just have that. Or, “I just wanna have income protection and I don’t need a death benefit.” You can have that. Or, “I wanna take equity exposure but I wanna make sure I have downside protection.” So the answer is I think the business will grow in totality because, now, we’re able to work with advisors in a very similar way to how they work with clients and customize solutions for their clients specifically.

Kevin: How should other executives and business owners think about navigating investing in the current market environment? 

Steve: I mean, I think executives and business owners, we may have different roles and different jobs, I think we’re all centered around this, “Am I gonna be okay? Do I have enough money to make sure I live the life that I’ve worked so hard to create for myself in retirement?” The reality is people are looking at annuities as a way to say, “I wanna make sure I’ve got enough money,” and we used to say kind of mailbox money back in the 90s, “I wanna make sure that I can go in like our grandparents did and get the envelope out on the 1st and the 15th and make sure that I can go fund my life and stay with my grandkids and go travel and do all those kinds of things.” So I think what you’re seeing now is people saying, “My portfolio is challenged, because, again, interest rates are going up, I’ve also got inflation going up, and I’ve got to have my money continue to grow.” Very few people are in a position to let their money retire at the same time they retire and that’s, I think, where we come in and are very effective, which is let’s continue to make sure the assets are growing, because you’re going to have to keep up with an inflation number that’s now at an eight and it hadn’t been at an eight in a long time. So I’ve got to continue to do that. And the statistics, right? I’m going to live to be in my 90s, which is all great but if you think about the numbers, that means I can be retired or unemployed for 30 years. So what we’re doing is coming in and saying we can give you upside potential downside protection. We can give you guaranteed income to make sure that you’ve got that mailbox money that our grandparents lived off of on their pension. We can give you just tax deferral, if that’s what you’re needing to do to make sure you’re deferring the taxes and that’s also a way to add alpha, if you will, to a portfolio. So I think what people are looking at now is they’re looking at annuities and saying, “This is a tool that I can use to make sure that I’m going to be okay for the rest of my life.” And, again, as I mentioned earlier, you got 10,000 people turning 65 every single day, volatile market, inflation, interest rates, all these different things and folks are not comfortable going and just buying equities without knowing that they’re going to be okay in their 70s, 80s, and 90s.

Kevin: What has been the impact or will be the future impact of rising interest rates on investors and how is it impacting investors’ strategies and products, including annuities? 

Steve: Well, I mean, I think the biggest thing you’ve seen is rates go up a couple hundred basis points and, all of a sudden, my fixed income portfolio is down. And I know for a fact that that’s surprising to a lot of people. People don’t typically think about bonds going down and now you look at your account and you see rates went up and your fixed income portfolio is down and, again, that’s surprising and very unsettling for people. So rates going up and then you also have inflation going up, it just means your money’s got to work harder. And so I think what you’re going to end up finding is people that have, again, the 60-40 portfolio where 40 percent is in fixed income, that’s not necessarily as reliable as it once was to provide protection against equity volatility. And that’s where we come in. What we see advisors do a lot is use annuities as part of the fixed income sleeve and they use it, again, for protection. You know, interest rates going up is great for investors as it relates to annuities because as rates go up, we actually can pass on the rising rate environment through the guarantees. So the guarantees in annuities are much more attractive than they were, I mean, candidly, even 12 months ago. So we’re able to pass along the positives of rising interest rates to clients with the guarantees and also give them the upside of the market. And that’s where you’re seeing that become, in some cases, a better solution than just sitting in fixed income. So this is a really, really good time for our business to help advisors provide protection for their clients against rates going up and against inflation and all the other things we’ve discussed.

Sandy: We talked a lot about how annuities can be used for different purposes within a financial plan but how important is it to bring life insurance and health insurance into those wealth discussions for the overall retirement planning? 

Steve: Critical, right? I mean, it’s critical for people to understand the entirety of their portfolio and I think that’s why financial advisors are so valuable to people because they’re able to come in and say, “Let’s look at the entire picture,” and able to say, “This is your specific challenge,” which is different from your specific challenge and I think it’s important for people to be able to diagnose what the real challenges are for each family. So health care costs going up, that’s not a surprise to anybody so that means you’ve got, again, what we’ve talked about, you’ve got to make your money work harder for you. That’s where annuities actually can play in. I think life insurance, for the people that are fortunate enough to have more money than they need, life insurance has proven to be a very effective vehicle for advisors to use for their clients to pass on because it passes on in a more tax efficient manner. So a lot of people will use life insurance inside of a trust to pass on wealth. So the way I think a lot of people think about it is I’ve got my core assets, which are the money that I need to survive for the rest of my life, and if I’m fortunate enough to have excess, life insurance is a better vehicle than an annuity or just about anything else to pass it on. So I think that’s where you’re seeing all of this insurance come together, which is I’ve got health care costs going up, how can an annuity helped me make my money work harder, which we talked about, and then if I’ve got excess, my adviser will sometimes and oftentimes use life insurance to help me pass it on more effectively to my heirs.

Sandy: Great. So what do you see as the next big thing coming to the retirement marketplace? 

Steve: So I think the biggest thing that I’ve seen in the past 12 to 24 months is really a focus on the total person and what I mean by that is we actually have established through Columbia University a designation to be a holistic financial planning coach. What’s resonating with customers now is I’ve got the academic side, I’ve got the side that we just talked about, how do I use life insurance, what about my health care costs, what about my concerns around volatility, but, you know, what really people want to know is, “Can I go see the grandkids as often as I want? Can I go travel? Can I do the things that have been on my bucket list for a long period of time but we’ve both been working and now it’s our time? How do I go live the life that I want to live?” And that can be around philanthropy, “I wanna give back to my community.” It could be around, “I wanna make sure that I’m paying attention to my physical fitness, my spirituality.” All those different things are what I think people spend most of their time wanting. So, you’ve got this academic side which is I want to make sure that I can fund the life that I want but what I really want is to go live the life that I want to live. And I use the example a lot of a Fitbit, right? So Fitbit when it first came out or your Apple Watch or whatever you have, there’s a million different things that can tell you how many steps you’ve taken today. What I think we really focus on is, hey, you did your 10,000 steps but were those 10,000 steps meaningful for the life that you want to live? Did you make the most out of those 10,000 steps? Did you go see your kids? Did you go travel? Did you go do those things? Where were you getting your steps? I think that’s a really big one. In the annuity business specifically, we’ve been the innovator in this space quite frankly, I don’t think there’s much argument around that. We created the income space for the annuity world, we created the RILA. One of the biggest things we’ve done is we’ve combined our two ideas into one solution for clients where people can come in and buy a RILA, so get downside protection, and also get guaranteed income and we were the first ones to do it the way that we’ve done it. And we’ll continue to innovate, that’s very much our DNA. We’ve got some other big things in the pipeline that I’ll keep you posted on. But I think the focus on holistic life planning has really resonated with clients and then our ability to continue to be maniacally focused, if you will, on innovation inside the annuity and making sure that we’ve got our ear to the ground to hear what customers really want and create solutions that they want has been our DNA and will continue to be.

Kevin: How do you lead your team to continue to innovate and overcome challenges to make the most of opportunities?

Steve: Yeah, you know, I think what’s great, we work in an Agile framework in our company and so one of the many things that I love about my job is it really is a team. There isn’t really a hierarchy. We operate in such a way that I feel like in many ways I’m working for a very well-funded startup, if you will, because ideas are free flowing across the organization from everybody. It’s not Steve’s going to come in and mandate what we’re going to do. We’ve never worked like that. It’s what ideas do you have? What things do we think we can be doing? What are you hearing out in the field? What are you seeing in the fintech space that you think is interesting? So we have created a culture of innovation in this organization for the past several decades to where everybody feels comfortable saying, “We tried this, what about that? Let’s do research on these kinds of things.” So, from a team perspective, I think we create a lot of opportunities internally for people to have the platform to present ideas. So we do, actually, inside the organization, things that are very similar to Shark Tank where we allow people to come in with their ideas, regardless of where you are in the organization, to say, “I think this is a problem in the world and here’s an idea that I have to go solve it.” So we do a lot of that stuff internally and I think it’s really, really energizing. So we challenge ourselves to be innovative, we challenge ourselves to be customer focused, and, at the end of the day, everybody has a voice, regardless of where you are in the organization. That’s my absolute favorite thing about what I get to do every day is that everybody’s equal and everybody has an opportunity to create the next big thing. And if you think about that, and you can see I get excited about that, but if you think about that, you can be brand new in this business and you can have a great idea that becomes the next big thing that millions of people may use in their retirement. To me, that’s a very cool way to run a business and I’m very proud that we do that here.

Kevin: Steve, what’s one of the best decisions that you made that has a positive impact on your career? 

Steve: I think the best decision I made is I took risks. So what I mean by that is people in my career that have taken an interest in my development have said, “I think you can go lead this team,” even though maybe I didn’t know anything about the particular industry. So, as an example, in AllianceBernstein, they moved me into run the defined contribution business. I didn’t really know that much about the 401(k) business but what they did was said, “We think you’ve got the skill sets to lead a team, we’ll teach you the business.” So I’ve done that throughout my career. I’ve done lots of different things. I’ve run a wealth management business, I’ve run a defined contribution business, I’ve run an institutional business, and I think that’s really helped me in two ways. One, it’s helped my knowledge of the overall industry so it’s allowed me to have range, I think, but probably where it’s helped me the most is in my leadership because I encourage people to take risks, I encourage people to think through other opportunities, and I encourage outside thinking that’s not necessarily following a specific path. So I want people to come in and take risks and take opportunities. I tell people all the time I know insurance sounds boring or maybe wealth management sounds boring but it’s just absolutely not and if you take risks and go try different things throughout your career, typically, it pays off. Not that people that have done the same thing forever don’t have an extreme amount of success, there’s lots of examples of that. But, for me, learning different parts of the business and running different businesses has been by far the best decisions and those decisions were only available to me because people gave me those opportunities and that’s what I try to do is try to give lots of people opportunities to come in and create a differentiated platform for themselves.

Kevin: What advice would you give to someone looking to get into the financial services or insurance industry?

Steve: Well, I think if you’re 24 right now, we’re now in this world of Facebook and Instagram and Twitter and eBay and all this stuff. I mean, an insurance company job probably doesn’t sound appealing and I think the reality is, what I tell people is you really should get involved in what the opportunities are at each organization. So, as I mentioned earlier, I mean, for us to bring in somebody that’s brand new and say, “We’re gonna teach you this business,” you don’t need to have an economics degree, you don’t need to be some kind of financial savant. There are jobs in our business that require that but there’s many jobs that just wants you to be able to be effective at helping people. And that’s universal, regardless of what job you go to. So if you go into a fintech, an exciting sort of sexy startup, it’s trying to help people with something. That’s no different than what we do. So that’s why I mentioned earlier, I mean, in many ways, I view the energy that we create inside the organization as a startup and we are all centered around trying to help people. So you marry that with a culture that says everybody has a voice, everybody’s treated as an equal, and everybody has an opportunity to create game changing things for the industry. So we need people that are really focused on technology to deliver a better customer experience to our client. We need people that are focused on things. I mean, one of the best examples that I can tell you is, during the pandemic, many of us, when we started to go to restaurants again, you got the menu on your phone, the QR code, and I remember somebody kind of brand new with us saying, “Why don’t we just do our applications like that and why don’t we put this on our marketing literature and do QR code?” It was just like here’s a guy that’s out on a restaurant and thought, “Here’s something that’s really cool I haven’t seen, I’m looking at how to order my food. Can we use that in the insurance business?” and we vetted that out. So that to me is very, very cool. Having run a startup, there are benefits and challenges to a startup, there are benefits and challenges coming into an institution that treat your ideas like a startup but also will fund them.

Sandy: Awesome. Steve, thank you for your time today. It’s been great to hear your insights on how you see the retirement marketplace changing over the next few years. 

Steve: Thank you all very much. I really appreciate it. 

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