The top priority of nearly every large financial services firm today is to develop a practical strategy for selling retirement income products and services, a new study concludes.[@@]
The study by Financial Research Corporation, Boston, found 88% of responding financial firms consider developing or enhancing retirement income products and services to be “very important” or “of vital importance” to their firm’s strategic planning over the next 1 to 3 years.
The study surveyed 18 financial services firms, including brokerages, banks, insurance companies, defined contribution recordkeepers and mutual fund groups. FRC also interviewed a number of financial services executives.
FRC found 55% of respondents indicated a variety of organizational units were engaged in developing the retirement market.
It found the firms by and large are building a coordinated retirement market strategy that meshes organizational alignment, product development, marketing, and other components.
Among insurance companies, the sales units were the most engaged, because insurers already have a range of income and capital preservation products, such as immediate annuities, already in their arsenals, FRC notes.
Other initiatives FRC’s study found:
?Staff additions and reallocations. For instance, 100% of the recordkeeping firms surveyed reported their firms have either added or reallocated staff to address the need for retirement income services.
?Increased training. Training for client service and sales staff included areas like estate planning, health care and the use of products, such as annuities, in retirement income planning, FRC found.
More than half of firms indicated additional training has already been done or is in the works covering health care and health insurance.
Based on government data, the first baby boomers will reach age 60 on January 1, 2006, and by 2020 all 77 million will be over age 55, FRC notes.
Americans already have $18 trillion invested in mutual funds, stock and bonds, and deposit accounts, FRC points out. It estimates that $2 trillion of this will change from accumulation to retirement income over the next 10 years. This creates both a major opportunity and a significant risk, for financial firms stand to lose significant retirement savings they now hold, FRC warns.
Among the most dangerous potential impediments: delivery costs. FRC found 17% of respondents saw delivery cost as being “potentially hazardous” to their continued success in the retirement market.
“The declining account balances of retirees require that financial services firms carefully plan and implement retirement income product and service strategies, or else risk a gradual erosion of profits,” warns Chris Brown, FRC’s director of retirement market research.
FRC is a unit of the Bisys Group Inc., New York.