Baby boomers on the beach (Image: Shutterstock) (Image: Shutterstock)

An estimated 10,000 workers enter retirement every day, a number that will rise as the tail end of the baby boomer generation reaches the age of 65 over the next 10 years. The implications for financial service providers are immense, as boomers have been a demographic sweet spot that has generated record demand for investment services and advice — through good times and bad — over several decades.

As they wrap up the most economically productive phase of their lives, late boomers are shifting from a lifetime of asset accumulation to a process of decumulation. Therefore, it’s a good time to determine if current strategies — which have brought financial advisors and wealth managers the success they enjoy today — will continue to be relevant in the months and years to come.

Uncertain State of Boomer Retirement

To be sure, boomers — especially those entering retirement now and in the near future — are in need of solid counseling. In the recent 2019 Retirement Plan Participation Satisfaction Study from J.D. Power, we surveyed boomers who participate in defined contribution plans and found some concerning trends.

  • Fewer than 1 in 4 respondents in this demographic segment reported being “very confident” in their retirement readiness.
  • Just 1 in 5 indicated they were “very confident” in their ability to leave money for heirs.
  • Only 1 in 8 felt they were “very confident” in their understanding of what it will take to effectively address health care and medical issues over the course of their retirement.

Born between 1946 and 1964, boomers currently straddle every phase of the retirement experience. More importantly, they are the first generation in modern times facing the need to take responsibility for planning and managing their own retirement because fewer people have access to pensions or other defined benefit plans. It is part of why this generation has counted so heavily on the support of financial advisors and wealth managers.

Behavioral Distinctions

While there are many behavioral characteristics that tend to define the baby boomers as a whole, they cannot be painted with a single brush. Our research on full-serviced, professionally advised investors found three key ways in which members of this group tend to change as they pass from employment to retirement.

  • Evolving attitudes toward risk — As investors’ employment-based income either declines or abruptly terminates, they tend to reassess their attitude toward investment risk. About two-thirds (64%) of retired boomers surveyed describe themselves as either “moderately conservative,” or “conservative” investors. That compares with only about half (52%) of fully employed boomers who describe themselves in the same way. Further, 16% of retired boomers report that their risk tolerance has declined just over the past 12 months.
  • Changing financial objectives — A second area of behavioral change revolves around the stated financial goals of current retirees and boomers that will soon enter retirement. Planning for retirement tends to be the dominant goal during working years, but once that milestone is reached other priorities begin to surface: Interest increases in strategies aligned with capital preservation, planning for major retirement-related purchases, travel, taxes and estate planning.
  • Simplification and consolidation — Our research also found a generation-wide interest in simplifying their financial lives as they enter retirement. This is expressed in decisions to consolidate the number of relationships boomers have with wealth management firms and advisors.

Our data showed that only 37% of boomers still employed full time did not have a secondary investment relationship. That percentage jumps to 53% among retired boomers.

For those advisors left standing, this is terrific news, as boomers employed full time on average allocate 80% of their investable assets to the care of a primary provider, and retired boomers allocate 87% of their assets under care of their primary provider. Further, the average additional amount retirees indicated they intended to invest with their primary firm over the next 12 months was more than twice what full-time employees indicated.

What’s an Advisor to Do?

In short, the largest and wealthiest demographic segment of investors is in the process of making a series of important decisions that will have a major impact on the advisory community. The key issue is how to best care for — and hang on to — clients through this transition period.

Beyond maintaining, and building on the foundation of trust that has secured current relationships with investors, our research suggests that there are a few critical areas of activity that deserve focus with clients moving into retirement.

  • Stay connected: This sounds like a no-brainer, but our research shows that about one in eight retired boomers reported no advisor-initiated contact with them at all over the last 12 months, and that group was much less satisfied than employed boomers reporting no contact.

Conversely, retirees with at least three advisor-initiated contacts were more satisfied than the employed group with comparable levels of contact. Obviously, retirees generally have more time on their hands, and are not only more likely to interact with the advisor personally but also are more digitally engaged than their employed counterparts, with higher average interactions with both web and mobile.

  • Revisit and reassess risk tolerance and goals: These are important conversations to have regularly with any client, but especially as the transition to retirement approaches and after it passes, because investors may find the experience different from what they had expected.

When it hasn’t happened already, this can also be a great opportunity to broaden the conversation to include a spouse or partner and next-generation beneficiary. There’s an abundance of research showing that most assets are lost after either inter- or intra-generational wealth transfer events.

  • Understand clients’ financial lives holistically: Advisors need to position themselves as the primary relationship with the client as early as possible to benefit from the consolidation that often occurs after retirement. Beyond building trust, which is critical, advisors need to ensure they understand the breadth of client needs and demonstrate the willingness and ability to connect the client with subject matter experts to help with areas outside of their own core competencies.

In a fee-based world where the revenue that firms and advisors generate is increasingly a function of client assets under management, the large demographic shift from accumulation to decumulation would appear to be more of a risk than an opportunity for advisors. But for advisors who can effectively anticipate the kinds of changes their clients will go through and take timely action to position themselves as the primary, trusted advisor, there is much to be gained.


Mike Foy is the senior director of wealth intelligence at J.D. Power, where he is responsible for developing and delivering research and consulting solutions that help advisors more effectively measure and improve the experience of their clients.