Think Needs When Targeting Aging Boomers

By

If you type the word “boomer” into an Internet search engine, youll soon be viewing hundreds of Web site listings for and about “seniors.”

Thats telling evidence of a compelling sales dynamic: Once the darlings of youth marketers from the 1960s through the 1980s, baby boomers are now prime territory for senior marketers.

For financial specialists, that raises an important question: How best to serve boomer-turning-senior clients?

This is the first of several articles that National Underwriter will publish this year on that topic. Today, well look at concepts for producers to consider. Future articles will cover approaches recommended by boomer researchers and insurers.

All told, baby boomers represent a huge financial field for marketers to plow. Born between 1946 and 1964, they number some 76 million in the United States alone.

On the economic side of things, they stand to receive an estimated $9 trillion to $13 trillion in inheritances; and, when they retire, many will receive huge sums from their own 401(k)s, IRAs, and other qualified retirement plans. Further, many are said to have expensive lifestyles–whether it be for homes, college educations, cars, adventure, travel, technology, divorce, or even health (to enhance the longevity they expect to have).

Its their financial needs now, and when they inherit and retire, that makes this huge demographic group so important to marketers. But how to reach them?

Producers are unanimous on one point: Younger boomers–those currently aged 38 to 45–present a greater marketing challenge than do older boomers–primarily because younger boomers tend to have less money to spend on higher-end financial products.

To get around this hurdle, Neil Frankle, focuses on younger boomers who are affluent.

“My target market is highly paid employees, in their 30s and 40s, who have stock options,” says Frankle, who is president of Wealth Resources Group in Woodland Hills, Calif. “Many are employees of large corporations. They have money and know they should do something with it, but they dont know how to harness it.”

Frankles strategy is to become familiar with the needs, wants, and desires of this target market. “Listen, ask the right questions, find out whats important to them, and provide what they need.”

When he does a good job for the first person at a company, he says he starts getting referrals.

For many such clients, Frankle sets up managed money accounts–mostly mutual funds and some stocks.

What about annuities? He doesnt use many. “These are young people,” he explains. “They dont want to lock up their money for 20 or more years–they dont know what will happen in their lives, or with taxes, or with the insurance companies.”

How about life insurance? “Ive used it some, but I plan to expand on that.”

What about younger boomers who want to save but who currently have little money for extras? Unless they can help him penetrate his chosen market, he prefers not to take them on as clients.

This is a matter of economics, Frankle says. “How could I survive if my clients are putting only $100 a month into a mutual fund or an annuity?”

Some producers can make a good living by selling financial products to younger mid-market boomers in a worksite sales setting, contends Alan Barthelman, president of AB & Associates, a worksite marketing firm in Cape Elizabeth, Mass.

However, “they need to be aware that they will be dealing with less sophisticated products,” he says. They also need to be aware that worksite sales requires dealing with various “organizational processes”–setting up enrollment meetings, arranging one-on-ones at the workplace, facilitating setup of the payroll deduction system, etc.

“If thats not in the planners nature–if the planner prefers seeing clients individually, while sitting in a leather chair in his office–this wont work,” Barthelman says.

Not all boomers are white-collar workers with high incomes, he adds. “Some work in factories or small to medium-sized companies. They do have financial needs, and financial products are available to meet those needs. But the nature of the planner has to fit the distribution strategy.”

The discussion of younger and older boomers does boil down to money, says Jeremy Alexander. He is president of Beacon Research, Evanston, Ill., and an associate of his father, Jerome Alexander, a Northbrook, Ill., planner.

“Its very tough for producers to stay in the business by working with younger boomers who are on a tight budget,” he says.

Therefore, in talking with younger people, he says, “we first talk about savings–specifically, saving enough emergency money to live for three months.” Next, look into the persons “catastrophe protection,” making sure the client has health, disability, auto and homeowners insurance.

Only then does broaching more conservative investments make sense, he says. These would include 529 college savings plans, fixed annuities, convertible term life insurance, conservative equity or bond funds, and so on.

“Planners really cant afford to spend much time with people who have little money left for anything else,” Alexander maintains. With commissions coming down and fee-based planning on the rise, he says, “planners are moving up the food chain, to more affluent clients.”

Many times, he says, those affluent clients are older boomers and retirees–the 46 to 56-year-olds who are venturing into “senior” territory. “Planners are just following the money,” he says of this trend.

As a result, competition for older boomers and retirees is increasing among planners, Alexander says.

What strategies are appropriate for these clients? “I approach them the same way I do all my clients,” answers Raymond P. Donnelly, principal of Advisors Resource Group, Ltd., Garden City, N.Y. His practice serves people age 30 through 90 and up.

Specifically, “first find out what the person needs–estate planning, asset transfer, or maybe accumulation or investment planning, etc. Then look at risk tolerance, fears, and objectives, and finally make recommendations.”

Its the need, not the age group, thats important, Donnelly says, echoing sentiments of many other producers.

“You really cant generalize, saying younger boomers are less financially stable than older boomers,” Donnelly continues. “I know some boomers in their late 40s who are really struggling right now. They may have lost jobs to downsizing, or gone through divorce, or had unexpected financial emergencies.”

Donnelly does allow that more older than younger boomers want to save for retirement. Also, a good number of older boomers start helping their parents with long term care–obtaining it and financing it. And more show interest in reducing taxes as they look at obtaining a stable, predictable retirement income for their parents or themselves, he says.

But other older boomers may still be saving for college (if, say, they had their children later in life or are seeing to their grandchildrens schooling), he points out.

The specifics affect which strategies are chosen. For those saving for retirement, he may recommend mutual funds or individual securities, if the time horizon is seven years or more. If the boomers parents need help, he may suggest LTC insurance and/or trusts, depending on the situation. As for the college savers, he may suggest 529 savings plans.

Its crucial, he adds, to do a good job educating clients. “Be a good teacher. Explain everything. And be patient.” Boomers who collect information put great value on that, he says. “You only have value to your clients if you know more than they do,” he says.

Some boomers do have a different mindset than yours, points out Larry Klein, president of Senior Resources, Walnut Creek, Calif.

His firm serves people age 60 and up who are retired. If boomers come in, he usually refers them to another planner who “speaks their language.”

“I find boomers tend to have a totally different mindset than my clients, so I dont believe I can be effective with them,” Klein explains.

The key for any planner, he concludes, is to specialize in a market that suits them. “Most who are successful specialize by client profession, industry or age. They know the issues and mentality, so they can really meet the needs.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, April 29, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.