As the industry keeps changing, it's important to know a company's "pedigree."
By Robert Dixon
The baby boomer generation has rippled across the past half-century, creating increased interest in and demand for products and services that fit the generation’s lifestyle. For insurance agents that means a bubble of unprecedented opportunity over the next few years, according to Jafor Iqbal, associate managing director of LIMRA Retirement Research.
Iqbal spoke to InsuranceNewsNet to highlight the sales opportunity suggested by new LIMRA Research released on Feb. 4, and to explore what advisors can do to prepare for the wave of retirement investing baby boomers are likely to generate.
LIMRA's analysis predicts that investible retirement assets of U.S. households aged 55+ will nearly double to $22 trillion by 2020, an unprecedented opportunity and one Iqbal doesn’t expect to see repeated.
Not only is the baby boom generation unique in its appetite for new products and services, it is the first generation to be largely responsible for its own retirement investment planning and decisions, Iqbal points out. This is the first generation in which most will receive retirement benefits from self-directed plans, not employer-run pension plans, he said. One result of that is a sea change in how Americans think about their retirement assets.
Baby boomers will take a more direct role than prior generations in developing plans to invest their portfolios to generate income, while continuing to grow their assets to meet future needs. Understanding and preparing for “Longevity risk” – preparing to live longer and covering the increasing costs of healthcare as they age is another area in which Iqbal thinks Americans will need support from well-educated advisors.
In 2010, U.S. households age 55+ held $12 trillion in investible assets, according to LIMRA’s analysis of the Survey of Consumers Finances, published by the Federal Reserve Board. Based on U.S. Census projections, the assets held by this group will grow to $22 trillion and be available to directly invest in products for generating retirement income. The study estimates that almost two-thirds of these assets will be directed towards products that will generate income for baby boomers in retirement.
“Advisors will need to be prepared to help people make the transition from investing while earning for retirement to planning while in retirement,” Iqbal said. Understanding the risks associated with having sufficient income to cover costs as they live longer than previous generations of retirees will be important, as will the facets of estate planning.
The growth in retirement funds to be invested should also create opportunities for annuity sales, Iqbal said.
The financial services industry is already changing to meet these new dynamics, Iqbal noted in a statement.
“With such a large demand, advisors may have to provide income product solutions more efficiently,” he is quoted. “We are witnessing financial services firms changing the structure and business model to accommodate more customer-centric information and process, promoting uniform tools and services across the institutional and retail businesses to capture rollovers, emphasizing smooth transition of assets from the savings in institutional plans to retail side of the business where most retirement income products and solution are typically available.”
The research findings are included in LIMRA’s Retirement Income Reference Book, which was published in December.
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