The greatest transfer of wealth in history is old news – but now that baby Boomer recipients are beginning to retire, on the heels of the meltdown, how will this affect the industry?
Changing client investment parameters are leaving some firms scrambling to adapt. The aftershocks of the Financial crisis are reverberating in portfolio allocation, and sweeping changes may result for the industry, from a service provider perspective (and then of course there will be regulatory reform, but that’s another horse entirely) . With more than a trillion dollars lost by those about to retire, many would be retirees are reportedly allocating an increasing portion of assets out of growth oriented products like equities, an into income producing products and managed accounts, according to a recent report released by consulting firm Deloitte LLP.
The Deloitte report offers 10 key 10 key actions financial services companies should consider as part of a plan to potentially succeed in the retirement market. The paper “Mining The Retirement Income Market” is here.
One of the biggest challenges faced by retirees will be relying more upon personal investments and social security, rather than upon defined-benefit plans.
And the challenge for Advisors, according to an article in TheStreet.com, “isn’t just handling the sheer number of retiring boomers or the magnitude of the money in motion. The larger issue is how to adapt from a focus on asset accumulation, which includes equity-based mutual funds and other growth-oriented investments, to the distribution-
The article goes on to report “Most people are going to have to cobble together what’s left,” according to Don McNees, a Deloitte principal in financial services. “They may have a couple of 401(k) plans from a few different employers, as well as some different pieces of an individual investment portfolio. Now, they have to try to figure out how to pool those disparate products into something that provides a monthly paycheck that matches up pretty well with their expense outflow.”
“There will be some [firms] that get there early and establish their brands in this space and, as a result, garner a significant share of the people reaching out for these kids of new solutions in the marketplace,”
Larger firms may struggle initially because many pre-retirees would rather deal with independent advisers for their retirement needs, McNees says. And this may create a window of opportunity for small firms able to adapt quickly.
“Innovation may be more substantive and profound than any that has occurred to date, and will likely influence all aspects of market offerings — product, advice, sales, service features and delivery,” says the Deloitte report.
According to Robert Shapiro of Trade Wall Street International, an independent broker dealer, “clients are placing increased importance on the relationship with their broker advisor. But this is a trend we’ve been planning for and anticipating for years. We’re finally seeing all the work pay off.”
But not all firms identified this trend early, nor saw the crisis looming. Many have just now begun to recognize the depth of potential structural changes to the retirement industry.
According to Shapiro, the strength of Trade Wall Street as a firm is due, at least in part, to long term planning for this eventuality. He also mentions the firms’ dealings with providers that did not participate directly in the crisis. “As an international firm looking to expand in the United States, we had an advantage, in that we focused on these issues well ahead of the actual events.”
Companies that want to profit from a shift in the burgeoning retirement-income field need to retool their operations and products, the Deloitte report says. The biggest retirement-investment firms, according to the report, include Fidelity Investments, Vanguard Group, T. Rowe Price (TROW ) and Charles Schwab (SCHW). Smaller, more adaptable firms may have a niche advantage in this market – if they are able to take advantage of the window.
Posted in A Manager's Guide, Advice, Insurance, International, Investing, Opinion, Rogan LaBier, Rogan LaBier, The Lookout, Top Stories, Trends
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TWS International offers financial services in over 50 countries around the world through financial advisors.