Distributors and financial advisors in the retirement income market will need to develop different approaches based on their own channel characteristics and client profiles.
This point became quite apparent in 2 surveys on retail advisor attitudes and perceptions conducted by Diversified Services Group in 2006. One survey, on the financial planning channel, was done in concert with the Financial Planning Association and OppenheimerFunds. The other, a bank channel survey, was done with the Bank Insurance & Securities Association and Symetra Financial.
Both surveys underscore the differences between channels–and in many cases, between firms within a channel.
This is noteworthy because both channels appear to be remarkably similar at one level. For instance, they overwhelmingly say their approach to retirement income clients is advice-driven, not product-driven. Both also have nearly identical perspectives on who is driving demand for retirement income solutions.
However, substantial differences emerged in the surveys that paint a far more complex picture.
The bank channel targets a broader market than the financial planner channel. It is not atypical for a single bank representative to serve over 1,000 clients. Approximately twice as many bank representatives report targeting investors with $50,000 to $250,000 of investable assets than did their counterparts in the financial planning channel. In contrast, only two-thirds as many bank representatives targeted investors with over $1 million of investable assets.
The financial planners surveyed were significantly more likely to have a CFP designation (94%) as compared to bank representatives (8%). Also, the planners were more experienced with retired or nearly retired clients–for instance, 94% had over 4 years experience in the market versus 74% of bank representatives.
The typical financial planner was in a small practice; 66% were in firms with fewer than 5 people. They were significantly more self-reliant, expecting to rely on themselves for new and upgraded planning tools. They also expected to aggregate significantly more of typical client assets in the process of developing a retirement income plan.
The planner profile that emerged is not one of scale, but of a deeper relationship with fewer, wealthier clients, likely with more complex needs.
These differences impact the channels in a number of ways, as shown in the chart.
Let’s look at the details.
What influenced advisors to focus on the retirement income market? A key factor for two-thirds of the bank channel representatives was availability of new products and solutions.
On the surface, that seems to contradict their belief that they are advice-driven, not product-driven. Given the bank channel’s scalability requirements, however, another interpretation is that without income producing product solutions in hand, it is more difficult and less economically feasible for them to address their much broader markets.