Anoka County Employees Gain Access to New Investment Service from AIG VALIC
First governmental entity in U.S. to offer ground-breaking investment advice and portfolio management services
HOUSTON, April 22, 2003 — AIG VALIC, a leading provider of retirement plan services to education, healthcare, government and other not-for-profit organizations, today announced that the Anoka County (Minnesota) Board of Commissioners voted to make available to county employees a unique AIG VALIC retirement investment advice program. Anoka County will be one of the first governmental entities in the nation to offer this unique service to its employees.
Available as a voluntary service from AIG VALIC, a member of American International Group, Inc., through the county's deferred-compensation retirement plan, AIG VALIC's Guided Portfolio ServicesSM gives Anoka County employees access to independent investment advice and automated, third-party portfolio management options. Ibbotson Associates, a leading authority on asset allocation and investment research planning and analysis, will provide the advice and portfolio management services by Internet, telephone or through a VFA financial advisor, face to face.
"The board believes in providing employees with the investment tools they need," says Dan Erhart, chairman, Anoka County Board of Commissioners. "While some employees might be confident in managing their own plans, others may not have the time, interest or knowledge to go it alone. That's why the county commissioners have agreed to offer this voluntary program to our employees."
"Anoka County retirement plan participants will now have access to independent professional investment advice in one of two ways, depending on how much control they desire," says AIG VALIC district manager John Lindeman. "They can use online tools to generate specific portfolio recommendations, or they can turn their accounts over to an independent advisory service to allocate and manage."
"Personalized investment advice is the new frontier in employer-sponsored retirement plan services," said Robert P. Condon, AIG VALIC president and chief executive officer. "As self-directed, defined contribution plans continue to serve as the principal method of savings for retirement, the political and business leadership of our country and plan participants themselves are recognizing that many people need professional help in managing these accounts."
Though employers such as Anoka County offer their employees an extremely powerful way to save for retirement and a broad range of investment options to help ensure that participants can create a suitably diversified portfolio, personalized professional investment advice options are rarely included in the plans. This is because until recently federal laws and regulations did not permit plan service providers such as AIG VALIC to also provide advice to individual participants in many private-sector defined-contributions plans. Following suit, most public sector plans also have not provided investment advice to their participants.
In December 2001, AIG SunAmerica, also a member of American International Group, Inc., received a U.S. Department of Labor Advisory Opinion that provided an exception to the legal prohibition, as long as the advice being provided is independently generated by a third-party expert. Furthermore, it permits on-going asset management and allows licensed financial advisors of service providers to serve as facilitators to deliver the investment advice. AIG VALIC designed GPS in accordance with this opinion and is uniquely positioned to offer this program to existing as well as new clients.
Ibbotson Associates will provide the investment advice and portfolio management options underlying the new Guided Portfolio Services program. Ibbotson will use information drawn from each participant's individual financial profile and the investment options available in the participant's retirement plan to create a personalized wealth forecast, or retirement plan, including a recommended investment portfolio. If the participant chooses an automated portfolio management option, GPS will also assume discretionary authority over the account to implement the recommended portfolio, monitor on a quarterly basis its adherence to the recommended asset allocations, and rebalance individual investments as necessary, monitor the investment options, and update the wealth forecast.
"Some 60 million Americans now participate in self-directed retirement savings programs, investing an aggregate $2.5 billion in them each month," said Michael Henkel, president of Ibbotson Associates. "Unfortunately, a growing body of research suggests that many plan participants are ill-equipped for the task."
Henkel noted that both industry and academic research are discovering that many individual participants in defined-contribution retirement plans are not following basic, broadly accepted strategies for optimum long-term portfolio management, such as adequate asset diversification and regular portfolio rebalancing.
To the contrary, many individual accounts exhibit the effects of "goal-posting," in which assets are almost entirely invested in a single asset class. Academic observers have also noted a behavior they have labeled participant "inertia," an overriding tendency of plan participants, in the face of a wide range of investment choices, minimal investment knowledge, and rapidly changing financial market circumstances, to do nothing.
GPS addresses both of these issues. The program begins with a wealth forecast, developed from information such as the participant's desired retirement age and income, current investments and plan contribution rates, and other family assets, income sources and expenses. Based on the wealth forecast, GPS provides recommendations for savings rates going forward and a specific asset-allocation strategy for the participant's retirement investments. This allocation strategy is then used to develop an investment portfolio drawing on the investment options available in the participant's retirement plan.
For those participants who choose the portfolio management option, the program will automatically implement the recommended model investment portfolio, monitoring its performance and re-balancing investment amounts as needed on a quarterly basis. Participants can update their personalized financial profile at any time, such as for the birth of a child or an inheritance, and the program will adjust its recommendations and implement a revised model investment portfolio as needed.
Participants who wish to retain control over their plan accounts may access the GPS wealth forecast and model investment portfolio portions online. They retain responsibility for implementing the advice and monitoring their portfolio's actual performance.
With more than $50 billion in total assets, AIG VALIC is an industry leader and currently manages long-term investment programs for more than 28,000 education, healthcare, public sector and other not-for-profit and for-profit organizations in more than 41,000 locations -- representing nearly 2 million investors -- throughout the country. AIG VALIC markets these plans and services through a national team of 2,000 financial advisors dedicated to providing unparalleled personal, face-to-face service. VALIC's financial strength (excluding safety or performance of variable investment options) has earned high ratings from the leading independent industry analysts. AIG VALIC is a marketing unit comprising VALIC Retirement Services Company; VALIC Financial Advisors, Inc; and The Variable Annuity Life Insurance Company (VALIC), all member companies of American International Group, Inc.
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