Putnam CEO urges retirement industry to evolve

New may not always be better, but it is what the retirement industry needs right now.

That’s the world according to Robert Reynolds. The Putnam Investments president and chief executive officer appealed to industry insiders at a conference in Florida this month to break down the barriers of conventional wisdom and usher in important innovations to the marketplace.

Following the market crash of 2008, Reynolds stressed the importance of a new, modern take on product, portfolio construction, risk management and diversification to address the priorities and challenges faced by investors today. His thoughts reflect those of Putnam’s recently launched awareness building campaign, “New Ways of Thinking,” which emphasizes the importance of financial advisers and investors to anticipate the evolution of and capitalize on new opportunities in the investment markets.

“We find ourselves moving — ever so tentatively — into a financial future with seemingly only one certainty: It will likely be very different than the investment world in which we all grew up,” Reynolds explained. “This suggests that conventional wisdom shaped by decades of high-return investing — first in equities from 1982 to 2000, then in fixed-income markets over most of this young century — needs to be re-examined, revised or even scrapped.”

Reynolds noted lower returns and increased volatility of core equity and bond markets over the past decade as the biggest source of investor angst.

“Amid higher volatility, rising tax rates, political uncertainties and near-zero interest rates, Abraham Lincoln’s great adage, ‘We need to think anew, and act anew,’ is more relevant than ever,” Reynolds said. “Investors, advisers, and asset management providers all should consider a new blend of traditional and alternative strategies to help reach critical financial goals in this new investment era.”

Reynolds also urged industry insiders to proactively address three key retirement policy changes that could dramatically improve retirement readiness in the United States. Like many of his colleagues, Reynolds pushed the benefits of “full-auto” practices — including auto-enrollment and reenrollment, auto-escalation and QDIAs — recommending that providers make such practices standard or even mandatory for every defined contribution plan in the country. He also supported the extension of workplace savings coverage to all working Americans, so that everyone who pays Social Security taxes also has the option to save for their own retirement. Finally, he emphasized that the industry average 7% participant savings rate should be raised to at least 10% to ensure sufficient savings for retirement.

Irene Park writes for Financial Planning, a SourceMedia publication.