NEEDHAM, Mass. (7/2/08)--Retirement accounts, which represent more than $17 trillion of U.S. retirement funds, will be a primary driver of income assets, according to new research from TowerGroup. Therefore financial institutions, including credit unions, should focus more on this area if they wish to succeed in the overall retirement income market. The TowerGroup research report, titled “Wrestling with Retirement Income: Key Challenges and Solutions for the Wealth Management Industry,” is authored by Sean Cuniff, a research director in the Brokerage and Wealth Management Practice at TowerGroup. U.S. financial institutions are devoting enormous amounts of resources to retirement income planning, and spending millions of dollars on advisory tools, income-focused products, and marketing. However, many firms are struggling to find a way to launch effective and profitable retirement income programs, particularly those targeted to consumers comprising the large “affluent” and “emerging affluent” asset segments. TowerGroup believes that, through 2011, the largest opportunity for retirement income services is in the affluent segment ($500,000 to $1.5 million in investable assets) and the emerging affluent segment ($250,000 to $500,000 in investable assets). Clients in these markets have sufficient assets to warrant careful planning and ongoing management, yet they do not have enough wealth to be immune from concerns about running out of assets prematurely. Offering retirement income solutions to the affluent and emerging affluent U.S. population is a challenging proposition. Yet the coming wave of retiring baby boomers presents an opportunity that cannot be ignored, TowerGroup said. TowerGroup believes a “holistic” advisory solution incorporating the smart use of technology is the only way to offer clients the comprehensive solutions they need to effectively manage their retirement income. To achieve success in this area, organizations must:
* Align the divisions of the organization to overcome existing product and service silos; * Focus on holistic advice and planning to offer more than strictly a product solution; * Retain tax-advantaged accounts using experienced and well-trained personnel; * Rethink service models by applying expert teams, centers of expertise, or alliance programs; * Evolve revenue and compensation strategies towards asset-based and non-traditional fee arrangements; and * Invest in technology to improve advice, maximize the use of client data, manage complex revenue arrangements, and streamline regulatory licensing and training.
Financial institutions that effectively target retirement assets and promote fee-based solutions will be able to generate long-term stable revenue while meeting the needs of their clients, the report said. The careful use of technology will enable them to make such offerings available to clients at a reasonable cost and win a competitive advantage.