So even though the 1929 crash decimated investors’ capital (in fact, it did worse than decimate capital), the new-breed of retirement income products would have continued to pay a minimum of $10,000 a year income for the remainder of an individual’s life. If the same individual had invested $200,000 in the product at age 65 in 1982, the protected income base would have ratcheted up over time, reaching a peak of almost $600,000 by age 81. At that point the guaranteed income level would have climbed from $10,000 a year to $30,000 – a figure that was then locked-in and guaranteed for the past 10 years, right through the GFC up to today. (If the value of the fund were to subsequently grow to more than its previous peak, the guarantee would again ratchet up.)
Slow beginning After a relatively slow take-up of the guaranteed income concept, AXA says the product has more recently been well supported. “We had a fairly slow start, from the beginning in November 2007 though to the mid-point of November 2008,” says Adrian Emery, general manager of sales and marketing for AXA. “What we’ve seen in investment markets since the mid-point of 2008 and the second half of 2008 is a dramatic upturn in these types of products. “I’m tipping that by the end of this year we’ll go through $1 billion of funds flow in this year alone. “Clearly this is a product that clients and advisers alike are finding is working for them in a marketplace that has not only seen decline, but also as markets have stated to rise.
Capital protection isn’t just about falling markets; it’s also about rising markets. “We’ve now got more than 2000 advisers actively supporting the AXA North product, out of a marketplace of … probably 15,000 to 16,000 advisers.” Emery says capital guaranteed income products available today might look quite different from those in future as the concept is refined and developed. “The capital guaranteed/capital protected marketplace is a rapidly evolving area, with a whole range of players and products coming to the market, being managed in different ways, providing different types of solutions for clients, different types of investment portfolios, and one of the things that I do find interesting, when I read commentary about structured products, is just how diverse and wide the market is, from a manufacturer’s point of view,” Emery says. “From a consumer’s point of view, they’re probably looking for the same kind of thing: How do I make sure I protect the value of what I have built? How can I make sure I do not lose money going forward? How can I lock in some of the growth I’ve been making? How can I make sure I get income for the rest of my life?