Research: What’s your take on the looming shift from accumulation to distribution?
Macchia: It’s as real as anything can be. There’s no denying that demographics is driving the shift from accumulation to income generation and that the scale of the transition, in both population and dollar terms, is unmatched in history. We’re talking about $20 trillion shifting to income generation, which will need to be spread out over retirements lasting decades more than previous generations experienced.
How can the industry serve this huge market?
There are many challenges. The No. 1 challenge, in my judgment, may surprise you. It’s communications. In the not-too-distant future, we’ll be facing the need to compliantly communicate with tens of millions of individuals who will be requiring distribution planning guidance at the same time that as many as 50 percent of today’s financial advisors will be retiring. This is a very significant challenge, and solving it will require an innovative combination of web-based technology, compliant educational content and engaging web-browser experiences. We’re going to have to use web-based technology wisely to help advisors interact with many more prospects, or we’re gong to miss out on lots of future business opportunities.
So technology is the answer?
At the very least, it will be a great determinant of success or failure. I see an ongoing revolution in communications strategies leading to significant reliance on web-based strategies — but putting the advisor in the central role. For years following the recognition of the Internet, these technologies really led in the financial services industry to paranoia: Advisors were going to be disintermediated. In fact, the future will bring clients and prospects to advisors in ways that would have been unimaginable. The advisor’s capabilities will be expanded exponentially.
How can an individual advisor get a piece of the action?
First, by recognizing the magnitude of the business opportunity and then by embracing an approach to creating durable inflation-adjusted retirement income. There will be many approaches to choose from; you can make the analogy to various religions. Some will align with product answers, some with comprehensive solutions that embrace multiple products. Some will opt to join the religion of systematic withdrawal plans. Still others, the religion of laddered asset strategies.
What happens to the accumulation business?