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Fidelity Big Rallies the Troops at NICSA


MIAMI -- With Baby Boomers turning age 50 at a rate of 12,000 a day, meeting the needs of mutual fund investors has forced investment advisors to redefine retirement. That's one person every eight seconds for those scoring at home.

This is an alarming statistic, considering the mutual fund industry has enjoyed tremendous growth for more than two decades. In 1980, only 5.7% of U.S. households owned mutual fund shares, according to the Investment Company Institute. Today, nearly half the nation, or roughly 53 million households, own mutual funds. Indeed, funds have done a great job of getting assets in the door and preaching the importance of accumulating wealth, but they've not necessarily done a great job in preparing their clients for life after retirement.

"People are absolutely terrified that they're not going to have enough money for retirement," said Ellyn McColgan, president of Fidelity Brokerage Co., in her keynote address at the 22nd Annual National Investment Company Services Association (NICSA) Conference & Expo late last month.

Certainly, a three-year bear market has played a major role in depleting the retirement savings of most Americans. But one-in-five already-retired individuals don't even have a plan and are relying on the meager monthly payouts distributed from their Social Security plans. Additionally, many Boomers historically have contributed to their 401(k) savings plans what they think they can afford instead of what they will need. Based on that premise, there is plenty of blame to be passed on to fund management.

McColgan's rousing speech at the Doral Golf Resort & Spa challenged fund executives to "finish what they started" and begin viewing helping people move their money to the sidelines as a "growth opportunity." Essentially, retirees must change their financial thinking as they transition from full-time jobs and wealth accumulation to retirement and wealth drawdown.

That's the major sea change that has taken place in recent years, with the average age in this country at 59.5 and a good portion of the 76 million Baby Boomers nationwide not financially prepared to retire. As investment time horizons dwindle, there is no room to rely on a correction in the market to right financial mistakes.

McColgan, head of the retail and institutional brokerage arm of fund giant Fidelity Investments, noted that the median retirement savings balance of persons over the age of 60 is $42,000. "That is not enough," she said, adding that while investors should not be terrified of being in financial straits, the industry should "mildly disturb them" about the true cost of living into their twilight years.

A Simple Plan

She outlined four key tenets of helping would-be retirees get on the right track. Perhaps the most important facet of easing that transition is education. A big part of the fiduciary responsibility of the advisor is knowing their subject's needs and helping them develop their own points of view. McColgan said that education can be achieved through several ways, including offering various investment seminars and maintaining an open dialogue with them.

One lesson that needs to be stated more clearly is that life expectancy has grown significantly in the last two decades due to advancing technology, better hospital care and medicine and the benefits of a healthier diet. Naturally, if folks are living longer, they may have to work five years longer or keep a part-time job after retirement to be financially secure.

The second part of the equation is service, which means being able to offer the client a dedicated support staff with a specialized skill set. Another important facet of today's retirement investing world is offering clients income product solutions and shifting them away from growth offerings, as they get older. A major catalyst for the bubble bursting was that too many investors were overexposed to growth products like technology stocks that had no proven earnings track record.

Lastly, McColgan advised giving investors the tools and technology to apply an interactive approach to the investment process. She referenced things like expense calculators, online allocation plans and universal retirement accounts. "[Boomers] know their way around a computer, but they still want to talk to people. So you better be set up that way," McColgan said. "And keep it simple," she added.

In the end, it's not enough to get clients into the race. It is about seeing them through to the finish line. And the finish line for Boomers doesn't necessarily mean sitting in a chair reading the newspaper in a dreary den. Rather, it can mean doing all the exciting things they never had the time to do prior to retirement, whether it be traveling, skiing, hiking, golfing and the like.

Her presentation ended with a fast-paced television ad featuring senior citizens enjoying these types of activities, illustrating how Fidelity is "redefining retirement."

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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