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Responding to the PowerBoomer' Surge: Capturing Rollovers Means Providing More than Mutual Funds


As the so-called "PowerBoomers" approach retirement, a surge of assets will begin leaving retirement plans and flowing into the open market.

And as they retire, this group, now between the ages of 40 and 60 with between $1 million and $2 million in assets, are likely to shed 25% of their advisers, according to Laura Varas, president of Mast Hill Consulting in Hingham, Mass., and research partner with Financial Research Corp. of Boston.

Companies that don't want to be culled will have to do more than provide a place for investors to park their rollover dollars. FRC estimates that between 20% and 40% of all PowerBoomer assets are up for grabs. With investors over 55 controlling 70% of assets to invest, catering to this market is critical.

"Firms that are going to lose are firms that don't necessarily have a retirement focus, and firms that are not cooperating across functions such as investment, marketing, healthcare, banking and estate planning," said Varas, co-author of a recently released FRC study entitled, "Engaging PowerBoomers: Winning Investment Products and Retirement Solutions."

"People look at the next 40 years in retirement and the idea of going it alone is daunting. People are looking for an advocate," said Edmond Walters, chairman and chief executive of eMoney Advisor in Conshohocken, Pa.

In a survey of 648 PowerBoomers, FRC found that trust is a huge issue. In fact, 34% ranked honesty as the top quality they seek in an adviser.

That may be because many Boomers have no plan. Only 24% said they have a written financial plan. Yet when it comes to retirement, they know they need help. FRC found that 52% of PowerBoomers had sought advice about planning for retirement.

Moreover, the younger the investor, the more likely they were to have sought advice, with 61% of those between 40 and 44 saying they had asked for retirement planning help.

Still, the efforts they do exert tend to be basic. When asked how much time each month PowerBoomers spent planning for retirement, 30% said they spent less than one hour, while 41% said they allocate between one and three hours.

It is the adviser in whom they have the most faith that PowerBoomers tend to consider their primary adviser, not necessarily the adviser with whom they have the most assets, FRC found. In fact, 18% of PowerBoomers said that they had less than a quarter of their assets invested with their primary adviser now. But later, companies that foster such relationships stand to profit, Varas said.

Companies that think that simply because investors are familiar with their brand through their retirement plans may confront competition from some unexpected places. For example the AARP of Washington last year launched AARP Financial, which offers five mutual funds and emphasizes the importance of preparing for retirement. "We have spent quite a bit of time researching the investing and saving situation in America, and it became pretty clear we need to help people save and invest in a better way," said Nancy Smith, vice president of investment services at AARP Financial.

Although the funds are open to all investors, not just AARP members, the company stands to benefit from its long-standing reputation as an advocate of older and retired workers, and its vast network of services, ranging from medical directories, to lists of attorneys and certified public accountants who come with the group's seal of approval.

The two most concerning situations PowerBoomers face are guarding their health and protecting against inflation.

"If you're worth $2 million, you have two assets: your finances and your health. One is no good without the other," Walters said.

In response, Walters urges eMoney affiliates to consider offering services such as linking client's medical records to their financial records on password-protected sites.

Other advisers have partnership programs with hospitals that help connect clients with top medical professionals and specialists.

And while these services have been available to high-net-worth clients for years, technology as simple as a scanner and basic software have made such combined services inexpensive, yet powerful, differentiators for advisers to provide.

FRC notes that in exchange for the security of knowing someone is tracking their medical progress along with their portfolio, clients will likely not flinch at a few added basis points in fees.

"You use that money to build out your infrastructure to provide more services to your clients," Walters said. "If you don't, you'll be antiquated," he said.

Ninety-seven percent of those interviewed by FRC said they were concerned that inflation will "erode their standard of living over the time they are retired." These concerns are best addressed not only with products, but services, such as automatic bill payment, or income management accounts, Varas said. In fact, among those interviewed, 78% said they liked the idea of a plan that not only managed their money, but their spending and income to a degree, she said.