Steve Gresham NEXT CHAPTER
Steve Gresham NEXT CHAPTER
The lesson for financial services is that current success is often the biggest obstacle to future success . Also , there are perils in complacency and the unwillingness to innovate .
A Warning To Advisors The warning is not just about doing the right thing , it ’ s about good business .
You are probably thinking my clients aren ’ t ordinary , spendthrift boomers . Yes , in fact , they are frugal savers . They have dealt with the health issues of parents and in-laws . More recently , they ’ ve seen contemporaries in their fifties who thought they were financially set for life and quit their jobs during the Great Resignation only to realize it was a mistake .
But even if your clients remain financially secure and independent , they are likely to be surrounded by a lot more friends and family who aren ’ t as fortunate — and they are reminded of that in their daily life . That ’ s not a good look for both the advisory profession or the financial services industry at large .
Detroit ’ s problem wasn ’ t just the safety of its cars . It was also a pervasive and persistent indifference to consumer preferences . At their peak , the Big Three of Chrysler , Ford and GM controlled more than 90 % of the U . S . auto market . Their share is now only 44 %, and 23 different companies around the world now sell cars in the United States . The consumers always win in the end , and if you don ’ t listen to them , they won ’ t argue with you . They ’ ll just go elsewhere .
The lesson here is that current success is often the biggest obstacle to future success . Another lesson is that there are perils in complacency and the unwillingness to innovate .
My mother and father got their first car in 1965 . It was a VW Beetle with a stick and no air conditioning . Their parents , both sets , each had a version of the big four-door sedan that was the No . 1 selling car design in America from 1946 to 1976 . But my parents could not afford one , so their choice was simple . Volkswagen was the No . 1 selling import car brand .
Fast-forward 60 years and VW is still No . 1 in the world while the Big Three have tanked . My parents bought American only when they needed room for four kids and a dog . When the kids were gone , the station wagon was gone and they were lured back to the superior value of the imports because of their sticker price , reliability and better gas mileage . The Big Three still weren ’ t getting it .
Now consider the retirement planning industry . Do consumers have choices and new innovations to choose from ? Yes , they do . Will they turn on trusted advisors if those advisors aren ’ t meeting their needs ? Yes , they will . The technology exists to replace most of the financial advice industry . The only question now is when . Really big scale investors are eyeing the retirement industry for disruption . They see the failing consumers , the rising anxiety , and the incumbent players ’ complacency . Just like VW and Honda and Toyota and BMW and ( more recently ) Tesla stole trillions from Detroit , financial disruptors are waiting in the wings to provide what traditional advice givers aren ’ t giving them .
So what are those consumers saying they want ? Consider what they ’ ve told the Alliance for Lifetime Income , which recently released a study of consumers and their advisors . It reveals consumers ’ retirement planning anxiety , and the ways many advisors are innovating to quell those concerns .
According to the alliance , 51 % of consumers age 45 to 75 feel they don ’ t have enough in retirement savings to last their lifetime . Nearly a third are not confident they will have enough to cover basic monthly expenses . In response , eight of 10 advisors have changed their retirement planning approach in the past year . Forty percent of advisors who did put more client assets into annuities . Ninety-seven percent of consumers say having guaranteed lifetime income in addition to Social Security in retirement is valuable . Fifty-four percent of advisors believe their clients could spend more money if they added the protection of an annuity to the retirement income plan . Ninety-three percent of consumers who protected their portfolio with an annuity in 2022 are satisfied with their investment choices for 2022 and 44 % are extremely satisfied .
But there ’ s also , apparently , a communication gap between advisors and clients . Consider these issues :
• Seventy-three percent of advisors say they raise the topic of retirement protection with clients , but only 33 % of investors agree .
• Nearly half of investors say they are extremely interested in owning an annuity , but only 19 % of advisors believe their clients have this level of interest .
• Fifty-one percent of consumers are uncertain that the 60 / 40 stock / bond model remains viable , while 28 % say it is outdated and other asset classes should be added . About half of advisors , meanwhile , say the model is valid .
If we ignore these gaps , we ignore the power of the consumer to change our business if we don ’ t change it ourselves .
The baby boomers don ’ t just dominate the financial industry . If we continue to ignore their very clear preferences for financing retirement — they will be the facilitators of whatever and whomever replaces us . They have the power .
STEVE GRESHAM is the managing principal of Next Chapter , a leadership community dedicated to achieving better retirement outcomes for everyone . He also serves as senior education advisor to the Alliance for Lifetime Income . He was previously the head of Fidelity ’ s Private Client Group . Steve is the author of The New Advisor for Life ( Wiley ).
24 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2023 WWW . FA-MAG . COM