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Future Of Financial Services Not Much Different: LIMRA

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NU Online News Service, Nov. 1, 4:00 p.m. – A panel of experts foresees no significant change to the financial services landscape by 2010, says Ram Gopalan, assistant vice president and head of research outreach, LIMRA International, Hartford, Conn.

“That doesn’t mean there will be no changes. There will, but they will be evolutionary, not revolutionary; they will be slow, not dramatic,” he says.

He presented the results of his findings at LIMRA’s recent annual meeting in Boston.

The panel speculates that because the Hispanic population will make up 14% of the entire U.S. population by 2010, there will be significant areas of growth in serving this sector, Gopalan says.

“Hispanics currently own very few insurance products compared to the rest of the population,” Gopalan says. And surveys show that Hispanics are interested in buying financial services products.

In 2010, opportunities will also exist in the pension-rollover market, he says.

“Boomers will be retiring around 2010, 2011, [and] they have a huge amount of money in 401(k) plans — an estimated $200 billion,” Gopalan says. “Somebody has to help them manage the money to plan for retirement.”

The long-term care insurance market will also be significant in the future, he says.

Driving the opportunities for growth are the aging of the population and consumers’ attitude toward how they want to buy financial products, Gopalan says. By this he means that in general, consumers will continue to want to buy products from someone face to face and not over the Internet. But they will use the Internet to gather information.

“Companies need to understand changes taking place and make changes in the way they market the product. They need to understand what the customers’ preferences are [and] to be more efficient than in the past in reaching the customers and serving them,” he says.

Preferences are effected by market climate, Gopalan says. Now that the stock market has been in a state of decline for two years, consumers are more interested in traditional protection products than they have been in the recent past. And there has been a parallel shift away from variable products, he says.

Because of the demand for traditional products, the panel foresees substantial growth in annuities because they guarantee income for the rest of one’s life, Gopalan says.

But the way consumers react and the types of products they will prefer eight years from now will most likely be a reflection of the stock market, he says.

“There is a high correlation between variable life sales and stock market indices, annuity sales and stock market growth,” Gopalan says. “As the stock market grows, so do variable products — that we know because of history.”

Another important market will be women, he says.

“Lots of people are saying women will be a significant market. Women live longer than men, so whatever we say about aging of the population is even more applicable to the women’s market,” Gopalan says.

“In many cases they are the ones who take care of aging parents, so they have to worry about themselves and parents, and they have to conserve their assets for more years than men.”