As Baby Boomers retire, and switch gears from asset accumulation to asset distribution, advisors are going to have to become more sophisticated and efficient in their delivery of financial advice, said Bill Dwyer, president of national sales and marketing for, who stopped by Registered Rep.’s editorial offices Thursday.
In 2009, 18 percent of the U.S. population was over the age of 60. By 2050, those over 60 are expected to account for 27 percent of the population, according to the Population Division of the Department of Economic and Social Affairs of the United Nations. That is the crucial age when many investors begin to tap into their assets for retirement income. And yet, the baby boomer generation moving into retirement today has far fewer safety nets than previous generations. They can’t rely on social security for retirement; they have 30 years of defined contribution plans behind them. People are living longer, even as health care costs are going up. And after the most recent downturn, many have seen their nest eggs decimated. Even the rich are worried about retirement.
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This all translates into record demand for financial advice, said Dwyer. And yet, clients are demanding much more time and attention from their financial advisors just at a time when providing wealth management has gotten more complex. Assets are also decreasing overall because advisors are managing a declining asset pool, said Sophie Schmitt, senior analyst at Aite Group. That means advisors will need to apply more holistic investment strategies and provide service more efficiently.
Let’s Get Complicated
On the investments end of things, advisors will need to use a more tactical approach, and rebalance on an annual basis, separating spending from investments, said Schmitt. “The main priority is no longer trying to grow these assets substantially,” said Thomas Dowling, director of retail advisory services at Aegis Capital. The priority is taking out the assets they need to live off of for the next 20 to 30 years.
In addition, there are more moving parts that have an impact on the amount of income clients have, such as an IRA, social security payments, pensions, and estate plans, said Scott Smith, Cerulli Associates senior analyst. These types of things are beyond most advisors’ capabilities, he added. “If you want to be a quarterback on that, you need to understand all the metrics involved.”
Meeting the Challenges
In the quest for efficiency, scale and technology will be paramount, said analysts from Cerulli and Advisor Impact. According to Smith, the independent broker-dealer behemoths like LPL have the resources to scale their operations, but 100-advisor shops are struggling to survive. These smaller will rely more on outsourcing, external vendors and custodians that can provide “off-the shelf” products.
Technology will also be key to becoming more efficient and getting in front of clients more, especially the integration of different technology platforms. Integration allows advisors to access all their programs and software in one user interface, eliminating the need to rekey data. All the back-office tasks need to be done faster to make up for lower asset levels, Schmitt said.
Advisors can also achieve efficiency by leveraging self-directed tools, such as one fromthat helps divests assets and transforms it into retirement income, Schmitt added.
“The faster you can do it, the faster you can turn around and help another client,” she said.
Smith also suggests adding junior planners to the practice, who can use technology and do some retirement planning. This way, the lead advisor doesn’t end up spending less time with clients. A 26-year-old with a CFP would be perfect for this role, and they’d also provide an exit plan for an advisor looking to retire.
Research and consulting firm Advisor Impact recommends conducting a capacity analysis, which involves drilling down into how many clients you have, how much time is spent with them and what roles and how many people are required to deliver on the promises you made, said Julie Littlechild, president. This may require adding new advisors to support planning, culling unprofitable clients or communicating more efficiently with clients.
“If you’re spending more and more time on a single relationship, that’s going to have an impact somewhere,” she said.
Senior Editor Jerry Gleeson contributed to this story.