“We think that with strategic allocation, we can give a higher probability of success to these accounts,” Farrington said.
Investors who open an account with $100,000 and a 5 percent withdrawal stream would receive $5,000 in their first year, but if in their second year the Consumer Price Index rate is measured at 5 percent, they would receive $5,250 in disbursements.
“We wanted to help create a predictable purchasing power off the account each year,” Farrington said. “The portfolio goes up and down, but much like your paycheck at work, this remains stable, and we think that’s what folks are really looking for.”
The accounts consist of Natixis affiliated mutual funds and ETFs and are currently designed for investors who have retired in the past 15 years.
Investors will have to pay for Natixis’s risk management and strategic and tactical asset allocation services, however. If there’s an immediately visible downside to the accounts, it’s their 1 percent fee. Farrington also noted that, unlike many annuities, the accounts come with no guarantees of success.
“If someone wants a guarantee, this account would not be for them,” he said. “If they are looking for something that allows them to replace part of their income, but still be in a liquid account, this could be a more comfortable instrument for them. Our vision is that this will be used alongside other vehicles that include Social Security and insurance products, but this would be a liquid element in that equation.”
The new accounts will be sold through financial advisors, with a minimum investment of $100,000.