New York Life - Marketing Management Case Analysis

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BAB25 – Case analysis 2: New York Life and Immediate Annuities
Unlike the old days where a retiree could rest assured that they could live out the rest of their life on their pension and social security checks, the retirees of today receive their pensions paid out in a lump sum that takes the place of the pension check, but encompasses the total amount a retiree has to live on until they pass away. This creates uncertainty in the amount a retiree can spend per month, and if the total amount is sufficient to last them until they pass away. Immediate annuities help to create certainty in the financial situation of retirees. While retirees can be certain that they will receive a social security check each month, the amount of income they
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Investment advisors actively manage their clients’ money. Immediate annuities do not allow for this as it is a one-time investment. This also means that the advisor/agent gets a one-time commission, which is less profitable compared to collecting multiple fees from one client over time for revocable investments (Rotemberg & Gourville, 2010). Additionally, advisors/agents often also do not have enough knowledge of the product, making it very hard to sell. Agents/advisors that do have knowledge of the product often state that immediate annuities are a bad retirement product. Only 9% of financial advisors (strongly) prefer the product, against 64% having a (very) weak preference for it (Morgan Stanley Research, 2007, as used in Rotemberg & Gourville, 2010). New York Life (NYL) has set its mind on growing the Guaranteed Lifetime Income (GLI) business in the future, but faces several possible paths in order to reach this goal. To be as cost-efficient as possible, we think that the company should select its pool of end-customers wisely. The focus on retirees should be maintained and even enforced, as many still do not know the products proposed by NYL. Furthermore, the focus should be broadened to a larger target group, to include the “typical” customers of the companies, families with children. As noted by Rotemberg and Gourville (2010), NYL tends to build long term relations with its clients, as agents follow them over time

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