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Here are a few facts that should be top-of-mind for every successful financial advisor. Today, there are about 47 million retired Americans controlling approximately $10.7 trillion in retirement account assets. Seventy-six million baby boomers are moving into retirement at the rate of 4-6% per year. With the generational transfer of wealth, it is estimated that this group will control more than $40 trillion in assets over the course of their retirement years.

Add this to the fact that Americans are living longer retirement lives and the role of providing retirement income assistance by government and employers is shrinking, and you have the largest market opportunity blip ever seen on the professional financial advisors radar screen.

But hold on. Before you launch that new marketing campaign, you need to make a strategic decision or two built on a quantitative understanding of retirees savings, spending and investment behaviors.

Listen and Learn

This need to understand recent retiree attitudes concerning savings and investments led us at Prudential Annuities to conduct a nationwide survey. We learned a lot, including that we cannot assume that we know their issues. Three messages resonated loudly above the others:

Fear of outliving their nest egg prompts retirees to “make do” on a limited income.

Instead of making their assets work for them, more than half of those polled “hoard” their savings and rely on Social Security and pension benefits to live (see Charts A and B).

Desire for independence during retirement drives lifestyle decisions of retirees.

Even though retirees cherish maintaining a comfortable living standard and financial independence, overwhelmingly most would compromise their standard of living in retirement rather than risk becoming a financial burden to loved ones (see Chart C).

Retirement does not always happen as planned for many of todays retirees.

Even among more affluent retirees, many of those surveyed were forced to retire before they were financially and emotionally prepared due to involuntary reasons such as health problems or layoffs (see Chart D).

Retirees Need to Know

Our research also led to an obvious conclusion: the need for education. Education for both investors and advisors.

Retirees and soon-to-be retirees need to know that todays modern financial products and investment portfolios can help them achieve their financial and lifestyle retirement goals. They do not have to just make do. Todays annuities and investment products are not the same as the archetype models sold in the 50s and 60s. In fact, products have been redesigned with flexibility and guarantees to address evolving investor needs.

As an industry, we spent decades successfully educating workers about the need to save for retirement, specifically the strategies for accumulating the assets to spend in retirement. Today, we are challenged with a post-retirement accumulation curriculum for retireeshow to continue asset growth, protect their savings and, at the same time, efficiently derive income from their retirement savings.

The implications of being frugal with retirement assets need to be fully explored. In some cases it may make sense to cling tightly to retirement savings, but retirees should understand the best ways to preserve their assets. Lest they inadvertently leave their heirs with an unpleasant tax-heavy burden.

Retirement planning does not end when a persons job ends. This is especially true when people find themselves unexpectedly retired due to health reasons or layoffs. This is a time when experienced financial advice can be most helpful. If retirement comes as a surprise, whatever the reason, a seasoned financial advisor is an invaluable ally.

Financial Professionals Need to Know

Insurance and investment professionals need to know how to address retirees changing needs. Brush up on topics such as risk management strategies during retirement and implications of Social Security rules on decisions made by their retired clients. Advisors have to be aware of the common financial pitfalls for retirees to avoid.

To serve this retiree market today and tomorrow, financial professionals must continue to re-educate themselves and their clients. For example, financial professionals might seek out continuing education sessions to stay informed about the changing issues important to retirees. And, they should introduce their clients to public seminars containing information investors need for successful retirement living.

Informed Investors + Informed Advisors = Market Opportunity

Financial services companies that provide products and services to those living in retirement must help todays retirees live their lives with informed decisions and effective financial advice. At the same time, companies must prepare for that giant blip of new retirees by keeping tabs on retiree behaviors and their retirement needs. There is no doubt that informed investors and educated financial advisors lead to increased market opportunities for those providing the financial solutions and advice that will be sought by Americans growing market of affluent retirees.

is president of Prudential Annuities, the combined annuity organization created as a result of Prudentials May 1, 2003, acquisition of American Skandia. David can be reached at david.odenath@prudential.com.


Reproduced from National Underwriter Edition, April 23, 2004. Copyright 2004 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.