May 7, 2008
Best Practices in delivering Retirement Income solutions
An opportunity for readers of TodaysAdvisor to share their input and thoughts
By Dennis Gallant of GDC Research and TodaysAdvisor Contributing Editor, and Howard Schneider of Practical Perspectives
It is well understood that the baby boom generation has been a pivotal force driving the ongoing evolution of financial services in the US. As the wave of 76 million plus boomers begins to approach traditional retirement age, it is creating one of the most significant and challenging opportunities ever for financial services providers, including financial advisors and brokers. The transition of boomers to retirement heralds a major shift in how saving, investments, wealth management, and risk protection are perceived. The collective psyche of the boomer generation and the financial providers they rely on will orient to the difficult and complex issues that surround generating sustainable income, dealing with individual and family legacy concerns, and maintaining overall personal and financial well being.
Undoubtedly, changes in the marketplace won’t happen overnight but will instead emerge gradually as more and more of the boomer generation approaches their 60’s. Remember, while the boomer generation is often discussed as if it were a huge homogeneous group, that is far from the reality, even on a simple dimension such as age, For example, while the oldest boomers have already turned age 62 (with some already drawing upon Social Security retirement benefits), the youngest boomers are only in their mid- 40’s, with many years of work to go before they even consider the possibility of retirement. And while the population of people age 65 plus will be growing rapidly, by 2015 – when the first boomer is considering the approach of their 70th birthday, the number of people age 50 to 64 in the US will vastly outnumber the total population age 65 and above.
Nonetheless, the changes driven by aging boomers will be unprecedented in the impact on how advisors and brokers serve their clients. All studies suggest it won’t be retirement as usual. Unfortunately, the expectations that many boomers have for an active and engaged retirement -- the New Retirement -- may not link up with increasing demands placed on their financial resources. Life expectancies continue to lengthen and many boomers will spend 25 to 30 years or more after leaving the workforce. This will place a heavy strain on their assets (which for many boomers are likely to be far too limited to ensure the quality of life they expect) and put a premium on generating regular income over an extended lifespan. In addition, boomers have been poor savers compared to their parents’ generation and lack other sources of secured income such as traditional pensions. And of course the concern over inflation and cost of living continues to increase with rising healthcare and energy costs exacerbating the financial challenge.
Concerns about retirement will transform how investors perceive wealth-related solutions and the financial providers they rely on. The shift from accumulating assets to the challenging issues involved with securing a long life spent in retirement will become increasingly apparent for many people. Today, investors may not fully comprehend all the challenges of the New Retirement nor be able to identify who to turn to for the broader support they will require. Advisors as well may not be fully prepared to deliver the extensive support that retirement clients may need or anticipate. Yet, the consensus within the industry is that aging boomers – especially those with affluence -- will seek out more sources of customized advice and guidance as they look for comprehensive, innovative solutions that address both sides of their personal balance sheet. And this guidance, especially for clients with affluence, will be delivered by financial advisors.
With client expectations and demands changing as the Pepsi Generation turns into the Centrum Generation, how will advisors deliver the support that clients require? There is much speculation and hypothesis regarding the best way for advisors to deliver services to aging boomers. Yet there appears to be little hard information on the best practices of advisors who are currently delivering solutions to clients as they make the transition to retirement and begin living in the next phase of their life journey.
It is within this context that Practical Perspectives and Gallant Distribution Consulting -- two leading independent consulting firms working with wealth management providers and distributors on retirement solutions – are initiating a detailed study of advisor practices regarding how support is being delivered as clients transition to the New Retirement. Our goal is to examine the current state of support and to identify best practices for those advisors focused on retirement income delivery and related issues. Critically, through both a qualitative and quantitative focus on this subject, we hope to shed light on some of the significant topics that advisors -- and the firms that support them -- must addressi
These topics include:
• What is the scope of retirement transition support that advisors are delivering to clients?
• What are the skills and expertise that advisors must possess to be effective in delivering retirement transition support?
• Are retirement transition clients truly more demanding and resource intensive for advisors to serve?
• What current gaps exist in the ability of the advisor to effectively serve the retirement needs of their clients?
• What is the right practice model for advisors wishing to concentrate on the retirement income market?
• What strategies are advisors using to create and deliver retirement income to their clients?
• How are advisors addressing the softer or non-traditional aspects of clients living in retirement such as second careers, nursing home placement, etc.?
• How are advisors using many of the new retirement income solutions that have been introduced in the past few years in anticipation of the wave of retiring boomers?
In future articles, we will update readers of TodaysAdvisor on what we have uncovered in our research and what it may mean for the next generation of advisors. To assist in this effort, we invite practicing financial advisors to participate in an online survey concerning the delivery of retirement income support. i
The survey can be found through the following link:
http://www.zoomerang.com/Survey/?p=WEB227SPT2H6JLWe also invite readers of
TodaysAdvisor to share with us any comments or issues related to serving clients as they transition to retirement. Feel free to contact us at
gallant@gdcresearch.com or
hss@practicalperspectives.comGDC Research is a boutique firm providing consulting solutions for US and international financial services companies. Our clients include broker dealers, asset managers, banks, insurance forms, and service providers.
gallant@gdcresearch.com or call 781-314-0606
Practical Perspectives provides customized strategic and tactical support to firms involved in the creation and distribution of asset management products and services. Support is offered for critical challenges including marketing, competitive intelligence, and new business development.
howard.schneider@practicalperspectives.com or 978-590-7290