BlackRock recently announced a major initiative to create a guaranteed income product that would be distributed in conjunction with Microsoft.
The deal reportedly was negotiated directly between BlackRock CEO Laurence Fink and Microsoft CEO Satya Nadella. The two firms aim to bring to market an annuitized product that could make use of Black Rock’s asset management expertise while still offering a guarantee of lifetime income. While details are still emerging, it represents the first time that two major players from such diverse industries have teamed up to specifically try to combat the issue of guaranteeing financial security to retirees.
For BlackRock the benefits are obvious. They can have more people purchase a product which would presumably be the funding mechanism to provide the returns needed for the lifetime guarantee. They also don’t have to hire, train, or pay a salesforce to distribute these products. They could potentially gain access to the millions of people who regularly use Microsoft personal, workplace, or cloud-based products. At its simplest, imagine having an app located on your Windows computer that would let you plan for and track your retirement savings in real-time.
On the Microsoft side, while they may be able to deepen the relationship with their users, the real benefit may be more about keeping Amazon out then letting Microsoft in. Microsoft’s Azure cloud service is a major competitor to Amazon and they want to make sure that they are “Keeping up with the Joneses.” Working with an established money manager such as BlackRock could allow Microsoft to provide a service that no other in their industry can easily match.
It’s possible that the firms may be looking to work with an outside insurance carrier to offer the guarantee; although that has not been confirmed yet. At a minimum, the firms would need to recordkeep the product, which is a capability that neither firm currently has.
One of the most interesting comments contained in the initial press release is that the new product “…would be made available to U.S. workers through their employers’ workplace savings plan.” No explanation was given as to how this would take place.
No action is required by plan sponsors at this point, but PEI feels it is important to note that change is definitely coming to the retirement industry and this change will be led by technology. According to Microsoft CEO Satya Nadella “Together with BlackRock we will apply the power of the cloud and AI to introduce new solutions that address this important challenge and reimagine retirement planning.”