Every week, I’m engaged in conversations with insurance and investment product companies asking me this question: why is it so hard to sell retirement income products/solutions to financial advisors? Last week I posted this very question on RIIA’s (Retirement Income Industry Association) Linkedin Discussion group which is now 1,250 members strong just to gather insights from a cross-section of financial professionals http://www.linkedin.com/groupItem?view=&gid=35362&type=member&item=52226123&qid=4d16db78-9b12-41e7-b6bb-162d7355cc2d&goback=%2Egmp_35362. The answer is, of course, it depends on how you’re selling it and to which audience.
Despite the growing share of transition and retired households in most advisor practices, adding retirement income planning and products to their accumulation-centric routines and tool box is a big challenge. Why? Well first, the retirement income business model is different from the accumulation business model. The best solution for the transitioning or retired client may not be perceived as the most profitable solution for the advisor. Second, many advisors are uncomfortable suggesting a new approach to their clients. Why? For many rational and emotional reasons, including: fear their clients will ask if this means their approach in the past was wrong; because the advisors haven’t yet mastered the retirement income story for client consumption; because many retirement income products are new, complex, and require more wholesaler support e.g. annuities; because advisors like products with long, proven track records; and because manyexisting advisor tools and processes don’t accomodate the integration of many new retirement income products.
So what’s a retirement income provider to do to break through to the advisors and power more growth? Is there an opportunity to add some pull to the push of retiement income products?
To be successful with advisors, segmenting the large advisor and agent universe and developing the right messaging platform – value proposition, proof points, sales tracks – is crucial. Complementing these strategic marketing elements with best-in-class training and support is essential. Remember, advisors will ultimately do what’s in the interest of their practice – matching your product with their tangible goals e.g. client retention, gathering new client assets (household view), acquiring new clients, making things easy, will make you a winner. And if the retirement income providers could collectively help the consumer understand the questions they should be asking their advisors about transitioning from accumulation to retirement income….
The emergence of electronic channels in the financial sector has led some commentators to predict the imminent demise of the branch channel. In a previous blog, EMI disputed this prediction, arguing that banks would maintain a significant physical presence, although there would be changes in branch activities.
U.S. banks’ ongoing commitment to their branch networks is seen in the latest quarterly financials. Data is available for 8 of the top 10 branch networks in the U.S. (the exceptions are Wells Fargo and TD Bank).
- These eight banks combined operated 23,152 branches in 1Q11, a decline of just 27 from 1Q10, and 7 from 4Q10.
- Two of these banks (Chase and U.S. Bank) grew their branch networks in the most recent quarter. And in April, Chase reported that it would open 100 branches in California and 37 branches in Florida in 2011.
- Bank of America registered the largest decline, with a decline of 51 branches between 4Q10 and 1Q11. Even after this decrease, it has more than 5,800 branches.
So, banks appeared committed to their branch networks for the foreseeable future. Electronic channels are now very effective in handling everyday service transactions, and are increasingly important sales channels. However, branches are still required for more complex and sensitive sales and service transactions, as well as for providing advice. However, banks need to continue to invest in their branches (in both physical infrastructure and personnel) in order to optimize effectiveness.
Visa and MasterCard both reported quarterly financials this week, which enables us to develop a picture of how the four main U.S. card networks (Visa, MasterCard, American Express and Discover) performed in terms of card volume.
See the table below for details on the card networks’ total U.S. card volume for 1Q11, with comparisons to 1Q10. Note:
- Strong year-on-year (y/y) growth in both debit card (+12.0%) and credit card (+9.2%) spending. Even though credit card spending growth continues to trail debit cards, growth rates have recovered in recent quarters, following significant declines in 2009. This reflects the efforts of leading credit card issuers to promote spending, as outstandings continue to decline.
- Strongest credit card volume performance came from American Express, which enjoyed double-digit growth in all customer segments (13% in consumer, 14% in small business, and 18% in corporate). Its share of total credit card spend rose from 24.6% in 1Q10 to 25.9% in 1Q11
- Discover reported 24% debit card growth through its Pulse PIN debit network. Visa also reported double-digit debit volume growth.
- Visa’s share of total (credit and debit) card spend among the four networks rose 46 bps y/y to 51.9% in 1Q11