Are you financially planning for your clients to live to 100?

Barcelon said there are a few more products on the market now for advisors to more efficiently provide their clients with longevity risk protection while building on their traditional portfolios. He spelled out three options – one of which is Purpose’s year-old Longevity Pension Fund.

The first option, life annuities, are typically offered by life insurance companies. Clients pay a large sum of money upfront, then are guaranteed certain income levels for their lifetime. While that income guarantee provides some assurance, he said it’s hard for many to turn their life savings over to an insurance company, especially when they can’t get their money back if they change their mind or die, meaning their estates also can’t access what’s left.

“These types of products are irrevocable. Once you hand it over to the insurance company, it’s pretty much their money,” said Barcelon, adding there’s little non-institutional demand for these.

The second option is guaranteed minimum withdrawal benefit (GMWB) funds, popular in the early 2000s. They’re like a segregated fund with an insurance wrapper. Like annuities, they provide clients with a life-long income. Unlike annuities, the clients can withdraw their funds. The trade-off is that the initial income range is much lower than what clients may be looking for in retirement.

Purpose’s Longevity Pension Plan, launched on June 1, 2021, incorporates the concept of longevity risk pooling and also provides life-time income through a mutual fund structure.