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