Category Archives: Retirement and Benefits

Retirement and The Catchers in The Rye

Leaders of the retirement industry met this week at Morningstar Corporate Headquarters in Chicago to exchange thoughts on the future of retirement income solutions.  The more than 150 industry leaders who attended share a common vision: connecting the silos of the retirement industry to facilitate the delivery of more robust solutions for households transitioning into or in the retired life-stage.   Their interest is in part driven by the increasing attractiveness of the 50+ segment, which, for  example, controls more than 50% of 401k assets under management.   As these assets are converted to streams of retirement income, opportunities and risks will increasingly emerge.

There are many barriers  today that prevent the industry from delivering optimal retirement solutions to households – both in the workplace and outside the work  place.  Some of these are legal, some are economic, some are cultural, and some are behavioral.

Despite all of these challenges, the retirement ecosystem is evolving quickly.  This evolution  is  being driven by changes in consumer behavior and attitudes and the high indebtedness of all sectors of the US economy.  As a result, an  increasing number of intermediaries and distributors are modifying their approaches to serving  households, plan sponsors, and participants.  The pure AUM model is going to be challenged and product selling is  being replaced by more process-centric, solution oritened approaches.   An increaing number of channels hold insurance and securities licenses and therefore consider insurance and investment products to design a retirement income solution.

Manufacturers that want to preserve market share and sustain growth will need to adapt to these changes, particularly in the area of product development and relationship management with channels.

Those that adapt quickly and support this evolution will win the loyalty of their channels.  Adapting means speaking your channels evolving language, helping your channels understand how your products fit into their financial planning processes and for which client types your product is appropriate, giving the advisor comfort when presenting your products to end-clients, and becoming the “go to” retirement income expert.   Most advisors become comfortable with a limited number of providers, so time is of the essence as financial advisors modify their practice to serve the increasingly large transition and retired life-stage segment.  And selecting and investing in the right channels to work with is critical.

Now is the time for providers of retirement income products to “lock-in” their channel relationships.  This will require thoughful marketing and sales.  Distinguishing between early adopters, novices, and laggards is critical and allocating your investments in the right market segments is essential.

And for those who are curious about the title of this post and what rye has to do with retirement:

“Anyway, I keep picturing all these little kids playing some game in this big field of rye and all.  Thousands of little kids, and nobody’s around – nobody big, I mean – except me.  And I’m standing on the edge of some crazy cliff.  What I have to do, I have to catch everybody if they start to go over the cliff – I mean if they’re running and they don’t look where they’re going I have to come out from somewhere and catch them.  That’s all I do all day.  I’d just be the catcher in the rye and all.  I know it’s crazy, but that’s the only thing I’d really like to be.”  ~J.D. Salinger, The Catcher in the Rye, Chapter 22, spoken by the character Holden Caulfield

Let’s rename social media

Social media is misnamed. Media are channels advertisers use to communicate one-way messages to target audiences. The real power of social networks is in the creation of the virtual community and the sharing and messaging it enables. Brands that use social networks simply as a media outlet are missing the point, and will alienate prospects and customers rather than engaging them.

Cheese, Financial Advisors, and Tipping Points

Professionals today in the Retirement Industry operate in a market characterized by seismic change and turmoil.   With global stock markets almost back to pre-recession levels and moderately re-surgent developed-market economies (albeit through life-support stimuli from central banks and treasury departments), some Retirement Industry professionals may think their cheese has come back to where it was pre-2007.

In a recent Retirement Intelligence Report, Campbell Edlund and I make a case that someone has indeed moved the industry’s cheese…and it’s not coming back.   Job insecurity (blue and white collar) driven by accelerated global competition(e.g. India, China, Brazil, South Korea, Singapore)  and Americans’ un-sustainably poor savings behavior,  have collided with long-term trends in rising dependency ratios (ratio of working to non-working population) and longevity, and the gradual decline of the defined benefit system that ensures continued income for many households when their work activity declines and eventually stops (retirement).

These macro-trends are now magnified and perhaps hard-coded in the consumer’s  and the advisor’s psyche by the recent Great Recession.  The current financial crisis is un- precedented and represents a traumatic experience for the baby boom generation.  And after exposure to this and the dot-com bust, many financial advisors and consumers who survived the last ten years may have a mild case of post-traumatic stress disorder – a state that will influence  future advisor  behavior with clients and the behavior of their clients.  And this is the key point.  The dynamics of the market that financial advisors serve – the end-consumer – have changed.  Some of these changes are emotional in nature, and some mirror long-term demographic trends that create “tipping points”.  But make no mistake – we do not believe these changes are cyclical in nature.

To defend and grow market share in the future, manufacturers of insurance,  investment and retirement products must align their product and marketing strategies with the changes their distribution and intermediary channel are witnessing from the end-consumer.  The good news: advisors, Plan Sponsors, and consumers want your help in demystifying the path foward.  They want a trusted source that can solve what is in most cases a retirement income problem.

For more on marketing  best practices for adapting to these changes and capturing your share of this $5 Trillion opportunity, send me an email at dehrenthal@emiboston.com and request a copy of our just published Intelligence Report on helping retirement professionals capture $5 trillion in motion.