Many boomers haven’t started to plan for retirement: Study

By Mark Brown | August 15, 2006 | Last updated on August 15, 2006
3 min read

By now most advisors have heard horror stories of people not planning for retirement, but how scary is it? Actually, it’s downright terrifying. According to a recent study by Forrester Research, four out of every 10 baby boomers in the U.S. between the ages of 41 and 50 have not started any financial planning for retirement.

Older boomers between 51 and 61 aren’t much better off; just three in 10 of this group have started saving for retirement. These are disturbing figures, considering not only the number of people soon to be entering retirement, but also that this group will be forced to finance more of their own living expenses when they stop working.

The study, entitled Capturing boomer retirement dollars, is based on U.S. households. There are no Canadian figures to compare, but it may be fair to suggest that the Canadian picture may be similar.

The main implication of the Forrester study is that firms aren’t meeting the retirement planning needs of boomers, who prefer to take care of their own finances, unlike the generation before them. Indeed, many boomers are researching retirement on their own before they meet with an advisor — assuming they meet with one at all.

According to the study, almost half of all boomers will turn to books and magazines to help them grapple with retirement planning. Approximately another 25% will visit informational websites like Yahoo! Finance for the same reason.

Books and magazines may be the most popular retirement resource used by boomers to research retirement, but that is not to say boomers are bypassing the advisor channel entirely. About 40% of boomers will visit a financial advisor or planner from a full-service brokerage, while another 25% of this cohort will call on an independent financial advisor for help.

Advisors will be frustrated to learn that boomers are reaching for the magazine rack, even though the survey reports financial advisors are considered to be the most helpful resource. Roughly three out of four boomers, both young and old, say independent financial advisors are the most helpful, followed by the service provided by a full-service brokerage. About 63% of younger boomers and 69% of older boomers indicated they received helpful or very helpful service by going that route.

Interestingly, older boomers were significantly more likely than younger boomers to consider life insurance agents as being more helpful — 63% of older boomers favouring this service versus 40% of younger boomers.

If advisors are so helpful, why are boomers turning to magazines?

“Too many firms are relying on retirement services and products developed for today’s retirees, instead of the next generation,” says Bill Doyle, vice-president and senior analyst with Forrester and author of the report.

In order to win boomer retirement assets, firms need to have a relationship with the customer prior to the retirement, Doyle writes in his recommendations. While for some retirees, this comment might be a tad late, his next recommendation isn’t: Have a human being give guidance.

“Boomers increasingly want advice and feel that the most helpful source of advice is a human advisor,” he notes. “In response, firms that were once direct-only have been adding human advice.”

The toughest, but most lucrative, space for advisors to serve has been the mass-affluent consumers. While there are hoards of advisors willing to serve the ultra-wealthy, this same group often can’t cost-effectively serve the mass-affluent.

Perhaps, then, it’s not surprising that boomers have a more take-charge approach to retirement than their parents did. Smart advisors, adds Doyle, will acknowledge competitors’ offers and even concede in some instances that a competitor’s offer is better at times, which signals that the advisor has the customer’s best interests in mind.

Firms also need to simplify the products they use. “Top firms simplify their customers’ lives,” writes Doyle. “On the product front, it means offering target-date funds — portfolios that automatically grow more conservative as a retirement date approaches.”

Financial planning needs to undergo a similar transformation. “The financial planning process must put simplicity ahead of comprehensiveness,” notes Doyle. By that he means advisors should rely more on financial planning software that can help cut down the amount of data entry, help recommend specific financial products and execute those recommended purchases automatically. The added benefit is that much of the data entry can be shifted to the client who wants to maintain control.

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Mark Brown