1 / 37

Cracking the Retirement Consumer Code

Cracking the Retirement Consumer Code. JOANNA ROTENBERG. May 10, 2007. Sustained anxiety for financial risks – health and longevity concerns spiking. 1. 4. Few consumers receive the advice they seek; advisors who deliver reap rewards. Primary Insights – Retirement Planning.

Patman
Download Presentation

Cracking the Retirement Consumer Code

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Cracking the Retirement Consumer Code JOANNA ROTENBERG May 10, 2007

  2. Sustained anxiety for financial risks – health and longevity concerns spiking 1 4 Few consumers receive the advice they seek; advisors who deliver reap rewards Primary Insights – Retirement Planning Serious misconceptions remain on how to fund retirement 2 Only 1 in 6pre-retirees are truly “prepared” for retirement 3

  3. Primary Insights – Retirement Planning 2 Sustained anxiety for financial risks – health and longevity concerns spiking 1 Serious misconceptions remain on how to fund retirement 4 Few consumers receive the advice they seek; advisors who deliver reap rewards 3 Only 1 in 6pre-retirees are truly “prepared” for retirement

  4. 29 60 61 53 56 49 44 53 57 53 28 49 46 49 26 44 15 1 Sustained Anxiety for Financial Risks – Health and Longevity Concerns Spiking • 2004 • 2006 • 2007 • Inflation/tax increases • Health expenses • Market risk • Lack of guaranteed Income • Longevity • Interest rates • Social Security Benefits

  5. 1 Health is an Important Concern for all Affluence Groups • Health anxiety by investable assets • Percent • 50K-100K • 100K-250K • 250K-1M • 1M+

  6. Women significantly more anxious than men 1 • Risk • Men • Women • Inflation/tax • 69 10 59 15 • 62 47 • Market fluctuations • Health 53 8 • 61 • Lack of guaranteed income • 59 43 16 18 • 59 • Interest rates 41 45 10 • 55 • Longevity • Social security benefits • 54 14 40

  7. 4 Few consumers receive the advice they seek; advisors who deliver reap rewards Primary Insights – Retirement Planning 2 Sustained anxiety for financial risks – health and longevity concerns spiking 1 Serious misconceptions remain on how to fund retirement 3 Only 1 in 6pre-retirees are truly “prepared” for retirement

  8. 5 • Pre –retirees who are • “Extremely/very likely” • Retirees who “have done” 39 33 30 12 11 10 9 5 • Part-/full-time job • Reduce spending • Sell primary residence • Tap into home equity Serious Misconceptions Remain Regarding how to Fund Retirement 2 • Methods to fund retirement, 2007 • Percent

  9. 6 Retirement age decreased, as consumers retire earlier than they expect 2 • Expected vs. Actual retirement age • Retired “earlier than expected” • Percent • Expected • Over 40% of consumers “forced” into retirement • Over a third retiring before 55 • Actual • 67 • 64 • 63 • 59 • 57 • 2007 • 2006 • 2007

  10. 30 • Forced early retirement • Percent of retirees • Survey average • 41 • $50-100K • 49 • 43 • $100-250K • 38 • $250K-1M • 1M+ • 30 Two in Five Retirees are being Forced to Retirement Earlier than Expected, Augmenting Lack of Preparedness 2 • Most common reason • Primary reason • Percent of retirees forced to early retirement • Job loss/ downsizing • Caring for spouse/family • Health • 24 • 30 46 • 32 • 8 60 • 41 • 8 51 • 25 • 10 65

  11. 4 Few consumers receive the advice they seek; advisors who deliver reap rewards Primary Insights – Retirement Planning 2 Sustained anxiety for financial risks – health and longevity concerns spiking 1 Serious misconceptions remain regarding how to fund retirement 3 Only 1 in 6pre-retirees are truly “prepared” for retirement

  12. “Prepared” for retire-ment • Fully following plans Only One in Six Pre-retirees Is “Prepared” for Retirement 3 • Plans are “compre-hensive” (address ≥ 3 retirement issues*) • All • pre-retirees • Havefinancial plans for retirement • All pre- • retirees • 100 • 51 • 25 • 16 Only 25-30% of affluent “prepared”

  13. Concerned Little preparation for health care risks 3 • Level of concern with health-related financial risks • Percent (“very/extremely”) • Life event • Prepared • Affording increases in medical costs each year • Affording long-term care expenses • Affording catastrophic medical expenses • Costs of livinglonger than you expected • Costs of end of life care and death

  14. 2 • Recent research claims consumers have saved more than enough. . . • . . . However, reality shows 40%+ of retirees believe they have saved too little • Saved too much • Percent of retirees Of those born between 1931 and 1941 at least 80% have accumulated more than enough wealth for retirement – An Economic Approach to Setting Retirement Savings Goals, 2006 • Saved too little • 45-54 • 55-64 • 65-74 88% of retirees age 51 and older had adequate wealth – Are Americans Saving “Optimally’” for Retirement, 2006 3 Despite Recent Research Claims, Retirees Believe they have not Saved Enough Not just the mass! More than 1 in 4 affluent/HNW retirees believe they saved too little

  15. …Primarily due to health and day-to-day expenses 3 • RETIREES • 50 • 36 • 34 • 27 • 15 • Longevity • Health expenses • Higher lifestyle expenses • Higher day to day expenses • Financially supporting children

  16. 7 • 2007 36 20 20 11 3 Retirees are Considering More Dramatic Actions than before • RETIREES • Methods to fund retirement • Percent responding extremely/very likely to do • 2006 20 • Reduce spending 12 • Sell primary residence • Part-/full- time job 10 • Tap into home equity 7

  17. Primary Insights – Retirement Planning 2 Sustained anxiety for financial risks – health and longevity concerns spiking 1 Serious misconceptions remain regarding how to fund retirement 4 Few consumers receive the advice they seek; advisors who deliver reap rewards 3 Only 1 in 6pre-retirees are truly “prepared” for retirement

  18. 36 Receiving advice 7 1 5 8 3 Few Consumers Receive the Advice They Seek 4 Percent of consumers • >$250K IN INVESTABLE ASSETS Seeking advice • Guaranteeing sufficient income for retirement • 27 • Protecting against healthcare risks • 24 • Protecting against inflation • 20 • Choosing investment products • 17 • How to financially prepare for retirement • 15

  19. Plans are “compre-hensive” (address ≥ 3 retirement issues) • All • pre-retirees with advisors • Havefinancial plans for retirement • “Prepared” for retire-ment • Fully following plans 4 Advisors that Engage in Comprehensive Financial Planning are Rewarded Handsomely • PRE-RETIREES WITH ADVISORS • Consumers completing financial plan purchase ~2 products following plan • ~80% of consumers willing to pay a fee for financial planning

  20. Sustained anxiety for financial risks – health and longevity concerns spiking 1 Primary Insights – Retirement Planning Serious misconceptions remain on how to fund retirement 2 4 Few consumers receive the advice they seek; advisors who deliver reap rewards 3 Only 1 in 6pre-retirees are truly “prepared” for retirement

  21. Independents pioneer a new advice model and emerge as the early winners 5 Worksitemay emerge as a robust alternative advice channel 6 Self directedsegment represents a real opportunity Primary Insights 7

  22. Primary Insights Independents pioneer a new advice model and emerge as the early winners 5 6 Self directedsegment represents a real opportunity Worksite may emerge as a robust alternative advice channel 7

  23. 100 5 Independents have the Deepest Consumer Relationships • Number of products purchased from primary firms by channel • Percent • Average # of products = • 2.7 • 3+ products • 46 • 2.0 • 1.8 • 1.6 • 1.6 • 28 • 23 • 16 • 15 • 2 • 24 • 20 • 21 • 22 • 25 • 53 • 64 • 64 • 32 • 47 • 1 • Independent • Brokerage • Banks • Investment • Insurance

  24. 34 Independents Pioneer a New Advice Model andEmerge as Early Winners 5 • >250 K INVESTABLE ASSETS • Level of advisor assistance • Percent • Difference vs. independents • Independentadvisors • Brokerage • Investment • Insurance • Bank • Overall asset allocation • -11 • -18 • -28 • -26 • Individual stocks, bonds, and mutual funds • 4 • -18 • -23 • -11 • Retirement goals • -12 • -12 • -11 • -17 • Overall financial plan • -26 • -22 • -18 • -33 • Identify new opportunities • -8 • -21 • -23 • -20 • Create guaranteed income • -10 • -16 • 1 • -23

  25. 34 • Advisor performance “extremely well” • Percent • Importance for consumers (“Extremely”) • Difference versus independents • Factors • Independent • Brokerage • Insurance • Bank • Investment • Being timely(e.g., responsive) • -9 • -17 • -21 • -25 • 46 • 68 • 5 • 1 • 2 • -3 • Objectivity • 42 • 45 • -5 • -8 • -10 • -13 • Simplicity • 35 • 53 • Transparency of fees • -10 • -9 • -13 • -17 • 30 • 55 • Credentials(e.g., CFP) • 31` • 41` • -1 • – • -7 • -8 5 And also Perform the Best against Satisfaction Drivers

  26. ~40% of assetsheld elsewhere owned by consumers with advisory relationship withindependents • Advisor channel • Primary institution • Insurance agent • Independent • Broker • Banker • Other* • Total • Independent • Brokerage • Investment • Insurance • Bank • Total • 5 • 18 • 7 • 8 • 5 • 43 • 2 • 23 • 6 • 2 • 6 • 39 • – • – • – • 3 • – • 3 • – • – • 1 • 1 • 2 • 4 • – • 2 • 3 • 1 • 5 • 11 • 7 • 43 • 17 • 15 • 18 • 100 5 Independents are Well-Positioned to Reach Assets from Other Institutions… • CONSUMERS WITH ADVISORS • Percent of assets, by primary institution and advisor channel * Includes accountants, lawyers, 401(K)/403(b) plan provider, CFP, family member or the individual

  27. 5 …And are Poised to Gain Substantially Going Forward • Almost 50% of consumers with independent advisors increased assets with them in last 3 years… • … and one-third expect to consolidate assets with their independent advisor over the next 3-5 years • 49 • 33

  28. 15 15 5 Wide variance across channels, AND within each channel 5 • Percent of consumers believing their primary financial institution is “extremely able” to address their retirement needs • Independent • Broker • Investment • A • B • C • A • B • C • D • A • B • C • Insurance • Bank • A • B • C • D • E • F • A • B • C • D • E

  29. Primary Insights Independents pioneer a new advice model and emerge as the early winners 5 6 Self directedsegment represents a real opportunity Worksite may emerge as a robust alternative advice channel 7

  30. 28 Self Directed Segment Represents a Big Opportunity 6 • Percent of HNW/affluentpre-retirees who are “self directed” • 42 • Self directed, with advisor (only to execute trades) • 7 • Has Financial advisors • Self directed without advisor • 50 • 43 • Percent of HNW/affluentretirees who are “self directed” • 34

  31. Plans are “compre-hensive” (address ≥ 3 retirement issues*) • Havefinancial plans for retirement • “Prepared” for retire-ment • Fully following plans • 52 • 25 • 18 Only one in five self-directed are Prepared for Retirement 6 • ABOVE $250K ONLY • Self directed • pre-retirees • Self directedpre- • retirees • 100 * Example issues include asset allocation, insurance, tax-efficient strategies, philanthropy, estate planning, etc.

  32. 11 • Guaranteeing sufficient income • Financially prepare for retirement • Healthcare risks • Longevity • Investment selection • Inflation risk • Maximize tax effectiveness • Interest rate risk • Asset allocation They Seek advice beyond accumulation 6 • Broader needs • Self directed consumer needs • Percent • “Traditionalaccumulation” needs 25% agree with the following statement: “I would like to continue to manage my own assets, but would be interested in targeted advice on specific topics (e.g., tax-efficient asset draw-down, estate)

  33. Independents pioneer a new advice model and emerge as the early winners 5 6 Self directedsegment represents a real opportunity Primary Insights Worksite may emerge as a robust alternative advice channel 7

  34. 5 7 Considerable opportunity remains to leverage 401K channel for IRA rollovers • Top factors considered most important in selecting an IRA provider • Percent of consumers 1 • Already had a relationship 2 • Ethical reputation 3 • Lower costs / fees 4 • Knowledge and expertise of advisors 5 • Known for superior investment performance 6 • My 401(k)/403(b) assets were already held at the firm 7 • Responsiveness of advisors • Product offering beyond IRAs 8 • Quality of IRA product 9 • Quicker / easier sign up process 10

  35. 39 7 Window of Opportunity Closes Rapidly • Available customers for IRA rollover after trigger event • 100% = Consumers who eventually completed a rollover 100 90 Only 20% of customers who decided to roll over their IRA were still “available” after 6 months 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 • Months after trigger event

  36. 10 7 Worksite financial advice may be one “in” for cementing tighter relationships Percent • Of the consumers who have workplace financial advice available… • Availability of financial advice at the worksite • 37 • Not • available • Available • 13 • Use 401K provider as primary provider • Don’t Know / • No selection • Currently • use • financial • advice

  37. Summary • Sustained anxiety for financial risks – health and longevity concerns spiking 1 • Serious misconceptions remain on how to fund retirement 2 • Only 1 in 6 pre-retirees are truly “prepared” for retirement 3 • Few consumers receive the advice they seek; advisors who deliver reap rewards 4 • Independents pioneer a new advice model and emerge as the early winners 5 • Self directed segment represents a real opportunity 6 • Worksite may emerge as a robust alternative advice channel 7

More Related