Unsolved Mystery
Retirement Income Journal, October 29th, 2009
The
“mystery shopper” is one of the oldest and most effective research
tools. You can learn a lot simply by having someone pose as a naïve
consumer and catch a seller off-guard.
Journalists use this trick. Industrial spies use it. The Drug
Enforcement Agency, obviously, uses it. So do market researchers.
A
couple of years ago, the Washington researcher and consultant Mathew
Greenwald deployed mystery shoppers to help annuity manufacturers and
marketers learn why more Americans don't buy life annuities to finance
their old age.
In
a two-part experiment, Greenwald first asked a bunch of academic
economists whether the typical Boomer retiree should buy an annuity.
“We know that annuitization is rarely used, and all kinds of reasons
have been given for that, but I wanted get some insights into the
desirability of an annuity,” Greenwald told RIJ recently.
In
other words, if no one at all vouches for annuities, further research
would be pointless. “Game over,” as it were. But all of the academics
recommended annuities.
“I
interviewed 11 economists and others who are not involved in selling
annuities,” Greenwald continued. “They all had different opinions about
the circumstances that call for annuities. Some thought you should buy
one at retirement. Some thought you should wait until age 70 when the
payouts are higher, or that you should buy longevity insurance that
starts when you're 85.”
But, small differences aside, the academics unanimously supported annuities.
In
the second part of the experiment, Greenwald recruited eight mystery
shoppers and assigned each of them to approach an investment advisor
and ask for help in creating a financial plan for retirement. “They
went to advisers and said, I'm close to retirement, and I'd like your
advice on how I should manage money in retirement.”
The
mystery shoppers were all real near-retirees with assets of roughly
$600,000 to $3 million. The advisors were registered reps at large
broker-dealers such as Wachovia, Morgan Stanley or Raymond James. The
meetings between clients and advisors were not a sham. The shoppers
presented real account statements and, in some cases, financial plans
were drawn up and fees were paid.
Read more of this article.
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