Financial firms unprepared for boomers’ retirement

Despite the impending retirement of the baby boom generation, most financial services firms have no specific marketing plan in place to address this massively wealthy group, according to a new study by an international management consulting firm.

“Our research indicates that nearly two out of three firms have not yet developed a comprehensive marketing and product strategy to capture boomer dollars,” says Malachi Black, a senior business analyst at kasina. “It’s not enough to just put a new wrapper on an existing product and say that you are addressing the needs of these investors.”

In the U.S., boomers make up 25% of the overall population and control about 70% of investable assets. Starting in 2011, boomers will start reaching 65 years of age at a rate of 4.5 million per year. While the kasina study was focused on the American market, there are parallels in Canada.

“Canadian demographers agree that there are a number of characteristics that make the boomer generation unique,” said David Enns of Credo Consulting, kasina’s joint marketing partner in Canada. “They plan to be more active in their retirement. They are less likely to be covered by traditional pensions. Income from government sources will play a smaller role for them than it did for their parents.”

Aside from being more self-reliant on funding their retirement, Boomers face the quandary of financing lengthy retirements, thanks to medical advances over the past generation.

“They can expect to live longer in retirement than any other generation in history,” says Enns. “Successfully marketing to the boomers will require taking all these elements into account, along with the group’s unique value set. Simply taking a product off the shelf and re-naming it won’t work.”

Despite massive spending on advertising focused on boomers, Black says much of that money would have been better spent on developing new products tailored to the needs of this generation.

“The firms that will be successful in winning business from boomers as they age and enter retirement will be those that use the framework of intelligent distribution to develop products and marketing strategies geared towards the specific needs and desires of this generation,” he says.

To that end, the kasina study recommends advisors research the sub-groups of boomers that they want to focus on, examining their habits, behaviour and retirement expectations. Currently only 20% of financial firms are studying these trends.

Advisors who have not already segmented their book should see this demographic shift as a signal that they cannot put it off any longer and eliminate the “one-size-fits-all” marketing strategy.

The kasina report also says financial firms must take a lead role in educating advisors on how to shift their marketing strategies to focus on their target subgroup.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com