From the December 2006 issue of Boomer Market Advisor • Subscribe!

Forward thinking five

Boomer Market Advisor brought together five industry giants for agendas and predictions for the new year. All were chosen for their enthusiasm and creativity in their respective fields, and the innovative ideas that fuel their success. Some names you'll recognize, others will be new, but look for all to make their mark in the weeks and months ahead.

The innovator {Tony Rochte}
Think of a forward-looking product like exchange-traded funds and you'll think Tony Rochte. Rochte recently took over as senior managing director at State Street Global Advisors after seven years with Barclays, where he developed the ishare product into the ETF powerhouse it is today.

"The growth in the ETF business has been explosive over the past six or seven years," Rochte says. "ETFs are something of a unique product in that different people can essentially use the same product for different reasons. Pensions, endowments, independent advisors, etc. -- it doesn't matter. It works for all of them."

While it's true ETF inflow rates are occurring at stratospheric levels, an estimated $10 trillion is still held in domestic mutual funds. But Rochte doesn't believe we're getting ahead of ourselves when discussing the impact of the ETF product on boomer retirement.

"Mutual fund managers actually use ETFs to equatize their cash positions," Rochte says. "But there is a need for alpha-generating products. So in this regard, mutual funds and ETFs can actually coexist, and we spend a lot of time educating advisors on this fact."

Even though he's had a hand in developing and marketing two of the most popular ETF products in their short history, the veteran isn't content to sit back and coast.

"We have a laboratory environment and I'm constantly talking with our mad scientists to see what 'next best thing' they come up with," he says. "We're in the process of releasing a suite of international ETFs and we're looking into fixed-income offerings. We're very forward looking in our culture, but we're also very disciplined about what we bring to market. We're doing everything we can to enhance the advisors' profile in the eyes of their clients."

The regulator {Mary Schapiro}
No-nonsense regulator Mary Schapiro was tapped to succeed Robert Glauber as chairman of the NASD earlier this year, but the announcement was hardly a surprise to industry watchers in the advisor community.

First appointed to the SEC by Ronald Reagan in the 1980s, she took the helm of the Commodity Futures Trading Commission in the mid-1990s, where she was famously slighted by Chicago Board of Trade head Thomas Donovan. Donovan told fellow board members he would not be "intimidated by some blond, 5-foot-2-inch girl."

"5-foot-5" was Schapiro's response.

Those who underestimate her do so at their own peril. She joined NASD in 1996 as president of NASD regulation and was named vice chairman in 2002. Her tough but fair style resulted in record fines collected by the organization in 2005.

"I attribute it to greater scrutiny," Schapiro says. "But you should realize that 85 percent of the fines came from 14 percent of the cases. I suspect that [amount] will be a high-water mark."

Recognizing investor trust and market integrity as her first priority, Schapiro is striking a conciliatory tone when discussing the organization's relationship with advisors.

"The relationship need not be adversarial. We solicit a significant amount of input from the industry, and we want them to participate in concrete ways, specifically in the rule-making process and training issues with member firms."

Her initiatives for the new year include an investor education push for boomers, seniors and military personnel. She'll also continue with the unenviable task of figuring out just what to do about equity-indexed annuity enforcement.

"I'm certainly not announcing that the NASD is taking over EIA enforcement," she explains. "But I am saying that we'll continue to work with other regulators to ensure consistency across related product lines."

The crusader {Dale Brown}
Financial Services Institute executive director and CEO Dale Brown has almost 20 years of experience in the financial services industry, but none of it as a broker/dealer or advisor. None-the-less, Brown has the confidence of the industry he represents, so much so that it trusts him to carry the flag into battle on the regulatory front.

"It takes time to cultivate relationships and gain trust, both on Capitol Hill and with the members I represent," he says. "But very early on in my career, someone said I had to be a student of the members of the organization. I can't be afraid to get out there and ask questions about them and their business."

It's working. Formed after a high-profile departure from the Financial Planning Association less than three years ago, the organization counts 100 member firms, representing 127,000 independent registered representatives. In 2005, the organization opened itself directly to reps and advisors, and has 1,300 members.

"We've been able to build a solid membership base very quickly, and I think that's a validation and endorsement of why we started this in the first place," Brown says. "We're recognized as a credible player, and we're on the right track. But we've got a long way to go in the current regulatory environment."

Brown counts his priorities in 2007 as continuing to build effective working relationships with regulators and members of Congress, as well as addressing variable annuity suitability issues and point-of-sale disclosures.

"The SEC has suspicions about the independent broker/dealer and advisor business models," Brown says. "We want to engage them and let them know we're here to help. We must ensure a healthy regulatory environment now more than ever. Americans need access to credible and affordable financial advice, and independent broker/dealers and advisors are in a position to provide that advice."

The futurist {Ken Dychtwald}
Psychologist, gerontologist, author of 12 books, sought-after speaker -- we're left wondering when, exactly, Ken Dychtwald has time to sleep? Since our introduction for the February 2005 cover story, we've interviewed the president of research and consulting firm Age Wave from the back seat of a taxicab in New York and a hotel room in the tropics, for the simple reason it's the only time he has available.

He's spent his career researching and writing about boomer retirement, and now that it's officially begun, he's in demand.

"I've been thinking a lot about where we are in the transformation of financial services," he explains. "And I've come up with five key points."

The first is the growing uncertainty with pensions and government entitlements, and the realization of self-funding retirement. Old news for advisors and trend watchers, says Dychtwald, but it's now getting through to the general public.

The second is longevity issues, specifically as they relate to older workers staying in their jobs longer. This also feeds the growing realization of self-funded retirements, and when these older workers look at it as a do-it-yourself process, "it can be overwhelming."

The third point is "the mid-wifing of the new retirement model. It used to be the vision was walking hand-in-hand down the beach. Now it's about so much more, and there's a flourishing of varied choices in retirement that have not been seen before."

The fourth point is a rebirth of financial services in response to the first three points. "It's less and less transactionally based and a more customized approach. Specifically with women, we're seeing the feminization of the financial industry. It's no longer about macho terms like 'bulls and bears' and 'making a killing in the market.' Now it's more about comfort, security and predictability."

His final point deals with a knowledge gap on the part of the average advisor. The advisor may know a lot about basis points, rates-of-return and risk components, but not much about people.

"This last point is changing," he says. "But it's changing slowly."

To help close this gap, Dychtwald recently released Retirement Bridge, an online research tool to help enlighten the advisor on how to better serve his client.

"We were hearing an enormous amount of frustration from clients about how advisors don't understand them," he says. "At the same time, advisors were telling us they're having trouble effectively relating to their clients. It's a situation that isn't working for advisor or client."

Detailed questionnaires about the client, his hopes and dreams and the manner in which he likes to be treated are filled out online, and extensive reports are then generated.

"To conduct this research himself would be enormously time consuming and expensive," Dychtwald says. "We help get it for him. Ultimately, it's about creating a higher level of engagement between advisor and client."

The advisor {Lew Altfest}
Just because Lew Altfest has been around for two decades doesn't mean he's stuck in his ways -- quite the opposite. The New York-based top advisor, author and Ph.D. regularly convenes his leadership council with the goal of analyzing current and future trends to be as proactive as possible with boomer retirement.

"We attempt to be as accurate as possible in our planning models," Altfest says. "It's no longer good enough to say 'I need a conservative return of 4 percent.' Withdrawal risk is heightened by the possibility that boomers will retire in a down market. If that happens in the initial stages of retirement, it's disastrous and very difficult to recover from."

Altfest's Total Portfolio Management program analyzes all aspects of his clients' financial lives, everything from the investment portfolio in stocks and bonds, to real estate holdings, to a detailed look at their income-generating sources -- most specifically their job immediately prior to retirement.

"It's called the correlation coefficient," he explains. "We take into account whether or not the client is tied to the market in their job during the accumulation stage. My income increases when the market increases because [my fee is] a percentage of assets under management. So I'm tied to the market. But a client might be in the pharmaceutical business and the majority of his income comes from other sources. But because he's in the pharmaceutical business, he might have all the medicine he needs and won't have to pay for it in retirement. So we take all of these things into account as we plan."

His location in the world's financial hub also means he has to be on the cutting edge in the practice enhancement technology he employs.

"We have sophisticated asset allocation software, document imaging technology, and other platforms that really reduce costs and increase revenue," he says. "But seeing as we're in New York, we also have to have sophisticated disaster relief measures in place, which include offsite locations for our data. On a number of fronts, we don't know what's going to happen, but we're all about preparation, with our clients and our practice."

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