How Annuity Training And A Retirement Institute Certificate Can Advance Your Career

By Cory Bowman

As a financial advisor, you will come to find that your clients may be concerned with their retirement investment decisions. As the retirement industry is expected to grow exponentially over the next decade and as baby boomers plan to retire, it is a good idea for you to achieve retirement certification from a retirement institute, in addition to annuity training. Clients are worried about inflation, their pensions and tax benefits among other things.

Throughout their investing lives, your soon to be retiree clients have probably invested in hedge funds. What will drive hedge fund returns you may ask? The persistence of these funds is directly related to autocorrelated returns. Serial correlation, also known as the first-order autocorrelation, measures the extent to which the return in one period is related to the return in the next period. Unlike correlation coefficients, a serial correlation only has to do with a single asset category. Serial correlations range from a negative number to positive 1.00. Examples of different serial coefficients of asset categories are REITs = real estate (0.1), EAFE = foreign stocks (0.1), LCS = large cap stocks (0.0), SCS = small cap stocks (0.0), LTB = long-term U.S. Government bonds (-0.3), and MTB = med-term U.S. Government bonds (-0.1). There is virtually no relationship between returns of most assets from one year to the next, excluding T-bills with an example serial coefficient of 0.8.


Another common investment for your clients to consider is bonds. The U.S. bond market is valued at roughly $30 trillion (2009); $82 trillion worldwide. The Barclays Aggregate Bond Index is comprised of more than 7,000 different bonds, many of which are so illiquid that fund managers cannot buy, even if they wanted to. In your annuity training, you will learn that R-squared reflects the percentage change of a funds fluctuation that can be explained by the change in its benchmark index. A fund that highly corresponds to its respective index has an R-squared in the high 80s or 90s. For the 10-year period ending September 2006, only two of 15 funds with 10-year R-squareds of 98 or higher outperformed the Barclays Aggregate Bond Index. Fund expenses prevented the other 13 possible funds from outperforming the index.

The advisor trained by a retirement institute who is seeking index-type returns for their retiree clients will have to either choose low expense funds or portfolios that have securities different than their respective indexspecifically, high-yield issues. Defaults on U.S. junk bonds for the 2006 calendar year were 1.3%, just under 1.0% for 2007, well below the historical average of 4.5%, as computed by S&P. In November 2009, the junk bond default rate peaked at an annualized rate of 14.5%. The actual default rate for all of 2009 was 13.7%; 151 issuers defaulted on a record $119 billion in bonds. Moodys expected the default rate to fall to 3.3% by the end of 2010. Surprisingly, for the first five months of 2010, the annualized rate was just 1%; nine issuer defaults, a cumulative total of $1.7 billion.

Planners who choose to attend a retirement institute will learn how to maximize their clients tax advantages of retirement savings, as well as other annuity options. In addition to basic annuity training and understanding, having a background in retirement planning will put you in ahead of other financial planners, as your vast skill set will be attractive to clients of all ages!

About the Author: Cory Bowman is Director of Ops at the Institute of Business Finance. IBF has helped thousands of members of the financial services industry attain designations. For more information about

annuity training


retirement institute

, visit


Permanent Link: