Boomers Change The Finacial Planning Industry Published


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Boomers Change The Finacial Planning Industry Published

  1. 1. Baby Boomer Generation and Wealth ManagementA paper by Glenn Griswold MBA MS PFP Candidate No matter what industry you're in, whether its construction, health care, insurance, banking, media, or any other business or occupation, the best way to market to Boomers is to focus on serving their needs. To help financial planners do so, the following are the five C's of Boomers' Real Needs2010Glenn GriswoldMBA MS PFP Candidate10/12/2010<br />Table of ContentsFuture Trends 2Time for Transition 3The Five C’s of Boomers Needs 4Out Dated Views-Not your Parents Life or Retirement Plan5Six Pillars to Build Good Wealth Management Strategies 8<br /> Baby Boomer Generation and Wealth Management <br /> By Glenn Griswold PFP 5371<br /> Future Trends<br />THE U.S. CENSUS BUREAU released information in 2005 telling us that the first of more than 77 million baby boomers would begin retiring in 2006. USA Today recently spotlighted the first boomer to apply for Social Security. The enormous air play being given to the boomers entering the retirement phase of their lives has given rise to more frequent discussions of how the wealth they have accumulated will be distributed in retirement. For many years, the financial industry focused on educating clients on the importance of retirement planning, with a focus on accumulation. Driven in large part by the boomers stage in life that focus has shifted to knowing more about how these accumulated funds will be distributed to provide for their lifetime income needs. In the variable annuity marketplace, the competition is lively. New products and new benefits are being launched at a pace that may have some heads spinning.<br />Today's Baby Boomers are a marketer's dream come true. But in order to share of the $3 trillion that this market has as a disposable income, slick ads and catchy jingles will only take you so far. To really appeal to this market of over 78 million people, you need to go beyond traditional marketing and consider the Boomers' real needs. In fact, when you make taking care of Boomers' needs your top marketing objective, you will not only sell more planning services, but you'll also build a loyal customer base that helps your practice grow.<br /> Time for Transition <br />So what are the Boomers' real needs? Since many Boomers are in a time of transition (doting parent to empty nester, full-time employee to retiree, etc.) their lives often involve transitioning to a new life stage or cycle. For this group, retirement is now an issue. Health changes are occurring. They’re taking care of aging parents. They require money to fund a new lifestyle or pay for a child’s college education. Grand parenting suddenly becomes a focus. No matter what the situation, many are shifting from an " achievement" mindset to " quality of life" values and concerns.<br />Some companies are taking bold steps in this direction, enlisting the support of some of the nation's top academic institutions to provide financial professionals with an opportunity to learn from investment and retirement experts who serve as faculty for some of the most prestigious business schools in the country. For example, 150 financial professionals attended the first-ever Retirement Strategy Program through The Wharton School at the University of Pennsylvania.<br />In a recent study by Soleares Research found that through Nov. 21, 2007, 35 companies filed 45 new guaranteed lifetime withdrawal benefits with the Securities and Exchange Commission. These two factors alone—new, innovative products and benefits, and the speed at which they are being launched—are cause for more and better training and education. Add product complexity to the mix and you have a critical need for learning. Some companies are starting to realize how lucrative the Boomer market can be. For example, Ameriprise Financial advertises a Dream Book Guide for people to create their own future.<br /> The Five C’s of Boomers Needs<br />No matter what industry you're in, whether its construction, health care, insurance, banking, media, or any other business or occupation, the best way to market to Boomers is to focus on serving their needs. To help financial planners do so, the following are the five C's of Boomers' Real Needs.<br />Community Belonging to a definable group is very important to Boomers, because they’re often losing an identity in other areas of their life. For example, now that the kids are grown and out of the house, they’re no longer the " soccer mom." With retirement looming, they're no longer the " over-achieving executive." That's why they want a place where they can connect with others who share their values and beliefs. And while the value of community is important in everyone's life, if you're marketing to Boomers, you need to use words and concepts that create a sense of belonging to a group of like-minded people. Consider such things as the RV club, the adventure travel group, and the retail store's " preferred shopper" or " passport savings" club. The more you appeal to the idea of joining a group of active people who share similar interests, the more Boomers will take notice of what you have to offer.<br /> Connections As a financial planner, you need to know your audience and speak their words. The same concept applies when marketing to Boomers. Use words and phrases that resonate with them and their needs. <br />Continuity The Boomer generation is one that’s used to growing and learning. They were influenced by talk radio, Oprah, personal growth topics, and self-development seminars. As such, they have a strong desire to change and evolve-to not be stuck in a box or labeled too old to do something. Therefore, make sure your marketing messages show how Boomers can learn, grow, or better themselves. <br /> Contribution Boomers need to feel a sense of contribution to a greater causes feeling that their life matters to someone or to a group. When we're in our 20s and 30s, jobs and parenting roles often fill that contribution need. But remember. Boomers are in transition and may be losing some of those roles.<br />Creativity Boomers grew up with the sixties mentality of " Don't tell me what to do; let me choose." Today, Boomers respond well to choices, menus, options, samples, etc. They want to create their own packages to meet their needs. They are bursting with new ideas and new ways of looking at old problems, and they won't settle for being pushed into pre-defined categories or choices. So to get them to choose your or service, make sure they have plenty of options to define or customize their plan from you.<br /> Out Dated Views-Not your Parents Life or Retirement Plan<br />Baby boomers have accumulated more assets than other generations and should have a solvent Social Security program. Some will struggle, although many will have more than they need to live a good life. The way those companies and individual’s a like view and plan for retirement may be outdated in two fundamental ways: <br />1. People mistake their financial plans for retirement plans. In doing so, they confuse the means with the ends. They fail to realize that their financial plans should support their lifestyle choices and activities. Far too often, people think in reverse. Instead of planning what they'll do and how to finance it, they plan for a source of income with little, if any, idea of how they will spend their days. Vague plans range from " I'll need to supplement my income" to " We're going to travel the world." Somewhere in between lays " professional grandparent" and " just taking it easy." All too often, when people think about their future, they neglect to consider what's most important— which activities are psychologically appropriate for them.<br />2. Companies undervalue the worth of deeply experienced employees.<br />Warnings of a brain drain or a shortage of qualified workers that would come when boomers started retiring turned out to be reality. Some industries, notably health care, got a very early wake-up call, including a nursing shortage that ballooned into a nursing crisis. This is only one of the many talent gaps that hit the sector as baby boomers began their retirement exodus.<br />Companies that cut high-salaried, experienced staff are revisiting their decision. Below are a few reasons why:<br />• According to the Department of Labor, ten million highly skilled jobs will go unfilled by 2011. The Employment Policy Foundation estimates that skilled workers will comprise 85% of the coming labor shortage.<br />• Many experts believe that over the next decade colleges will graduate too few candidates to fill technical and decision- making positions.<br />• A McKinsey study indicates that the supply of those ages 35-45 (the likely replacements for retiring skilled workers), will drop 15% as a percentage of the total workforce, compounding employers' difficulties in replacing experienced, retiring baby boomers. <br />Unfortunately, companies designed the structure and range of their benefit programs for a very different labor environment than the one they will soon face. <br />Early signs of acceptance among leading-edge baby boomer retirees shouldn't come as a surprise, at least not from the generation that ripped up the cultural rule book; proudly thought for itself; weathered a potentially crippling political crisis; saw portfolio values swell, wither and recover; and pragmatically adapted to (if not embraced) a transforming, youth-driven technology revolution. Baby boomer households were the first to contain two workers. Their life experience paved the way to a more coveted, and possibly in their minds, well-deserved second act—one wrought with mile-high expectations. They were finally ready to do their own thing. At the same time, a healthy number of baby boomers view work (whether a continuation of their career's work, or something different) as an ongoing and vital part of their retirement. This is also true of many that, financially, do not need to work. That this generation would approach retirement with a different attitude and greater awareness of what they want post career life to be seems only logical. In the author's opinion, the questions the new generation retirees have (and the new retirement planning addresses) are:<br />•What are the things that will truly bring fulfillment?<br />• What can personality type, work and life experience and attitudes toward transition predict about what's to come?<br />• What types of fulfillment did work provide that may need replacement in retirement, from commendation for a job well done?<br />Many believe that the problem is a lack of knowledge about what precisely will (or will not) occupy one's time. Generally speaking, the list of mistakes includes trying to do too much, trying to do too little, doing the wrong things and having no list at all. It should come as no surprise that baby boomers may be drawn both to the undertaking and designing of a more personal, individual and reflective type of retirement planning. After aII, Boomers lobbied to make psychotherapy a health benefit. There is evidence of the new retirement planning at work, told from both sides: a progressive company that saw the brain drain coming and took early and provocative steps to address it, and a near-retiree who found a second career, at near-retiree who found a second career, at the company from which he was soon to retire.<br />Not many companies look at retirement in the same way a certain West Coast industrial manufacturer did, especially since it started experimenting with a form of nonfinancial retirement planning as early as 1986. The experience gained over 20 years ago has today blossomed into a companywide effort to enhance the lives of as many of its aged 50 and older employees as possible. The reasons go beyond altruism, directly to retention. It's an effort that starts when an associate joins the company. It is assumed that every person hired, until that person proves he or herself unfit or economic realities otherwise dictate, is worth keeping. It encompasses life after work. It may be called a holistic approach to life planning and staff retention (in the best sense of holistic before it evolved into an overworked catchphrase).<br /> Six Pillars to Build Good Wealth Management Strategies <br />How does this affect Wealth Management Firms in the future and their practice? Boomers are living longer and as a result of the labor pool shrinking they will be working longer. The actuarial tables released by the IRS and the Federal Government show boomers as well as their parents are living longer. This has called for the term the “SANDWICH GENERATION “. Boomers have to care for aging parents and children from the Y generation who are taking longer to wrap up their education, military service and training before entering the work force. Many boomers have also created “BLENDED FAMILIES” that through marriage there are children in the family from other marriages. Another phoneme of boomers is that they have always been told to save, save, save and this has resulted in large amount of assets that were accumulated by this generation. <br /><ul><li>Wealth management firms should be prepared to open minded to their clients working past normal retirement ages not out of need of boomers, but the true need of their employers and communities.
  2. 2. Wealth management firms should be prepared to recommend helping boomers plan for their parent’s future.
  3. 3. Wealth management firms should be prepared to help boomers with complex estate and succession plans for family own businesses.
  4. 4. Wealth management firms will need to be prepared to educate their clients on the need to stay fully invested in their plan until the end of life.
  5. 5. Wealth management firms will need to be prepared to educate their client on the scientific approach to asset allocation with all the wealth they have accumulated.
  6. 6. Wealth management firms need to lobby their senators and congress to extend the age limits on withdrawals of IRA’s and 401K’s from 70 to beyond. </li></ul> <br />