A cardiologist recently advised a relative to have a certain surgical procedure. Because her husband was in between jobs, they made extra sure they were covered by their health insurance, since the procedure would cost at least $100,000. I recently spoke with a neighbor with the same heart-related condition (though less intense), who surfed the web and found that magnesium pills could help. In fact, they solved her problem. The cost for 180 tablets is just $7.99.
I find that scenarios like this are quite common. The surgeon recommends the knife — not because he likes to cut or wants to rake in the dollars, but because that’s what he knows. Just like vitamin gurus know vitamins.
The same phenomenon applies to the financial services industry. The big demographic challenge today is to provide a safe and enduring income for the swell of retiring boomers. The insurance companies solve this problem with annuities; the bond salesmen with municipal bonds; mutual fund companies offer lifecycle funds; other companies are packaging structured products. Everybody’s solution coincidentally involves the tools they already have in their own toolboxes.
It is for this reason that I have been impressed with the work of the Retirement Income Industry Association, a relatively new group of industry professionals seeking ways for advisors to provide their clients with optimal solutions for their income needs. The group, founded by Francois Gadenne (see profile, “Riding the Wave of the Future”), brings together representatives from the entire spectrum of financial services — including financial advisors — to address these issues. So it is unlike, say, the National Association of Variable Annuities, which is primarily interested in annuity sales. The feeling amongst the group is that there is no optimal solution as yet — and whoever finds the best solution will profit immensely. But in the meantime, regular discussion “across the silos” will help the industry get there.