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Retirement Planning > Saving for Retirement

On the Other Side of the Fence

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Over the years, conversations with Bruce Harrington have yielded insights for Investment Advisor readers (and editors, for that matter) into areas as diverse as 529 college savings plans and retirement income planning. At MFS Investment Management, Harrington served as VP and director of product development and marketing; before then, he was a VP of retirement marketing at Putnam Investments. Now, Har- rington has a new gig as managing director of Cogent Research’s wealth management practice. He’s also supposed to think about the issues that matter to financial services distribution companies and the advisors they serve. We asked him to share some of those thoughts with us in a telephone interview conducted on July 30.

So, give me some details about your new position.

We’re in Cambridge [Massachusetts], I started July 23, and I’m going to be heading up the financial services practice. Cogent has been around for 10 or 11 years as a research firm mostly focused on the health and consumer products side; they’ve decided to diversify their business into financial services arena. My partner in crime will be Tony Ferrara, who heads up a custom consulting practice–meaning he only does engagements for specific clients. My side of the business will focus more on “syndicated” or prepackaged research reports.

What is “syndicated” research

Typically it means you’re writing a fairly detailed research report that you’re selling to many people, but you’re also providing one-on-one consulting to the people who buy the package. So, for example, a few months ago, a Cogent report came out called Investor Brandscape that was a combination of primary interviews with about 4,000 high-net-worth investors, and some detailed information about the brands of mutual fund companies that they bought, and about their loyalty to those fund companies. It was a fairly unique effort to see how “brand” interplays in the mutual fund space. If you think about Coke and Pepsi or Cheer and Tide, they certainly have a very good grasp on brand and how that impacts everything. But in the mutual fund space it’s a new phenomenon to understand what [brand] means.

By financial services companies, do you just mean mutual fund companies?

No, also distribution companies like Merrill Lynch and Smith Barney, insurance companies like SunLife or The Hartford. The interesting thing–and this goes to your question as to why I came here–I’ve been in the mutual fund business building new products and businesses for 20 years. I’ve been reading this research that whole time. I always struggled with the research: It was interesting data, but I then had to take that data and synthesize business solutions, new opportunities–I had to try to figure out how I could use it to make money for my firm. Now I want to bottle that same exercise in this business.

You’ve been a consumer of this kind of research yourself for all those years, but now you’re on the other side?

That’s a good way to look at it.

So, are financial services companies–those kinds of firms you mentioned– good users of research?

There’s a wide spectrum. There are some people who buy the research because they want to be informed about what’s going on. Then there are other people who use the research to change business strategy or the way they’re perceived in the marketplace.

I’ll give you an example. I can’t say the name of the company, but I was visiting a client last week. They’ve very much integrated the idea of brand and loyalty into all their marketing, and are driving a sales strategy based on the results of how their brand plays in the marketplace compared to their major competitors.

That’s a case where research has changed behavior.

I interviewed Ken Fisher of Fisher Investments a few months back. He was talking about the advisor community writ large, and he argued that the advisor community and the entire financial services industry has not done a good job of market research on their own clients and customers, as the packaged goods industry has done, for example. He thinks that’s a mistake.

I agree with him wholeheartedly. In fact, the research we’re working on now is aimed specifically at financial advisors and trying to understand some of their mentality when they’re thinking about which products to buy and which brands to use.

Let me pick your brain on college savings plans. What was your reaction to this scandal on admissions officers directing students to certain loan companies and getting kickbacks?

I think it’s a travesty. People who work with those schools have an implicit level of trust in the admissions counselors, and for them to put their personal profit above the benefit to the students is a travesty.

Does the industry have a responsibility for educating Americans on retirement planning?

By the age of 45, every American should have done some sort of retirement analysis to figure out what they need to retire, and yet less than 50% of people have done anything like that. I think it’s incumbent on financial advisors to get out there and see that all their clients have some idea of what they’ll need.

One of the things I’d like to do is conduct a study on savings rates to understand what motivates people to save, and what gets them to save more.

Interesting. I wonder, for instance, is it an ethnic thing? Anecdotally, several groups value, say, education, and that’s the first thing they’ve done once they get married. They put money away, while other people just count on winning the lottery at some point.

You’re right; many Americans save in buckets. They have their “saving for college” account, and their “retirement account,” and their “first house account,” and they have their vacation account. So depending on where those needs stack up for them personally, they’ll overfund in one bucket or the other, rather than looking at it holistically, as I prefer, and almost as a hierarchy: You want to start saving for your own retirement first, because based on current life expectancies, you’re going to be retired for more than 30 years.

You can’t really take a loan out for retirement just yet, though reverse mortgages are getting there. A lot of people don’t realize you can use that retirement money–either IRA or 401(k)–to pay for college for your kids or yourself, so you should build up that retirement bucket first and then work your way down the hierarchy.

Most people don’t get started–they get scared by the ominous numbers we’re talking about, and that forces them into immobility. I’d prescribe that they start with $50/month and set up a systematic investment, and it’s like a snowball that grows. That $50/month over 18 years grows to over $20,000 at a 6% rate; that starts to make a difference.

Editor-In-Chief James J. Green can be reached at [email protected].


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