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Three Stages of the Future

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Over the next 15 to 20 years, as baby boomers age (the first boomers will reach age 65 in 2011), advisors will see many boomer clients who face challenges in three major stages, according to Chip Roame, managing principal at Tiburon Strategic Advisors in Tiburon, California. The first stage is “liquefaction of wealth”–as baby boomers roll out of 401(k) plans and sell small businesses. The next stage is the “retirement income challenge.” With the coming leap in longevity, boomers will need to manage their money for a longer period of time–possibly much longer–than their parents did. The third stage is the “wealth management craze,” where estate planning, trusts, wills–all the legacy items–will be needed.

Roame sees the product side continuing to evolve over the next 15-20 years, with the popularity of exchange-traded funds growing “substantially.” Another product he thinks bears watching is multiple-style portfolio (MSP) products in the separately managed account (SMA) world, because MSP-SMAs will offer better diversification and tax advantages. He foresees greater use of “index core and explore” strategies, in which an index ETF or fund is the core holding, with active managers running the other asset classes.

Select hedge funds in certain asset classes will do well but over all, independent advisors and discount brokers will take market share for the next 10 to 15 years, Roame suggests. “Wirehouses, banks, and insurance companies will all have lost share, and independent advisors and discount brokers will have taken share, because they have the least-biased, most-open-architecture, best-value offerings,” argues Roame.


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