Wealth Management Strategies for Boomer Retirement
Asset accumulation has been the centerpiece of wealth strategy, both for households and their financial services providers. But the impending retirement of the post World War II baby boom population has introduced a new set of priorities for an important segment of the wealth market, centered on distribution and payments.
Instead of looking for additional savings and investment products, a tidal wave of retiring households will be looking for critical assistance in managing resources, both to supplement monthly budgets and to extend core retirement assets as long as possible. This shifting customer orientation has significant implications for banks.
Already solidly positioned in household cash management and payments, banks will need to extend this customer orientation with retirement assets, and carve out an essential role in the boomer retirement market. The goal is to provide the expertise, advice and tools that retirement households will need to manage their finances; and also to provide innovative products for the staged disbursement of retirement assets.
The opportunity is enormous. During the five years extending through 2016, for example, about 1.4 million households will retire in the mass affluent category, which broadly encompasses from $100,000 to $1 million of investable wealth (exclusive of formal retirement accounts, insurance policies and home equity). This group alone will carry roughly $380 billion of investment assets into retirement, plus other substantial resources, and individuals on average can expect to spend roughly 17 years in retirement.
The institutions that can play a role in managing these resources stand to realize substantial revenues, including margin income on standby retirement balances and fee income on advisory and payment services. And the opportunity will grow as additional waves of baby boomers retire.
To win in this new market, however, banks will need a different customer orientation; a variety of new skills; and a much more coordinated outreach. Along with a composite financial picture of wealth and retirement customers, banks will need a segment-level understanding of customer needs and behaviors, and explicit strategies to win “share of wallet” with each major customer group. They also will need new products and online tools to stay competitive with myriad nonbank players circling the waters.
Asset accumulation has been the centerpiece of wealth strategy, both for households and their financial services providers. But the impending retirement of the post World War II baby boom population has introduced a new set of priorities for an important segment of the wealth market, centered on distribution and payments.
Instead of looking for additional savings and investment products, a tidal wave of retiring households will be looking for critical assistance in managing resources, both to supplement monthly budgets and to extend core retirement assets as long as possible. This shifting customer orientation has significant implications for banks.
Already solidly positioned in household cash management and payments, banks will need to extend this customer orientation with retirement assets, and carve out an essential role in the boomer retirement market. The goal is to provide the expertise, advice and tools that retirement households will need to manage their finances; and also to provide innovative products for the staged disbursement of retirement assets.
The opportunity is enormous. During the five years extending through 2016, for example, about 1.4 million households will retire in the mass affluent category, which broadly encompasses from $100,000 to $1 million of investable wealth (exclusive of formal retirement accounts, insurance policies and home equity). This group alone will carry roughly $380 billion of investment assets into retirement, plus other substantial resources, and individuals on average can expect to spend roughly 17 years in retirement.
The institutions that can play a role in managing these resources stand to realize substantial revenues, including margin income on standby retirement balances and fee income on advisory and payment services. And the opportunity will grow as additional waves of baby boomers retire.
To win in this new market, however, banks will need a different customer orientation; a variety of new skills; and a much more coordinated outreach. Along with a composite financial picture of wealth and retirement customers, banks will need a segment-level understanding of customer needs and behaviors, and explicit strategies to win “share of wallet” with each major customer group. They also will need new products and online tools to stay competitive with myriad nonbank players circling the waters.
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