What if you don’t envision your practice moving into the retirement advice realm? Perhaps another business scenario is where your practice could thrive in the future.
Expanding services in the retirement marketplace is one of four scenarios that an industry trade group envisions as the future of the financial advising profession.
“Advisor 2020: The Forces and Opportunities Shaping the Financial Services Advisor of the Future” is a joint research project by the National Association of Insurance and Financial Advisors (NAIFA) and the GAMA Foundation for Education and Research. In this study, NAIFA and the GAMA Foundation looked toward the start of the next decade and attempted to answer two questions: 1) Where will the business opportunities be found? 2) What will the advisor of the future need to do in order to remain relevant?
So where will those business opportunities be found? According to NAIFA and the GAMA Foundation, one of those opportunities will be in providing a wide array of advice and services as the baby boomers drive a new retirement culture. Read more about this in InsuranceNewsNet's June feature, "Gold in the Gray."
But if retirement advice isn’t where you see your practice heading, here are what NAIFA and the GAMA Foundation see as the other business scenarios of the future:
- The underserved middle market
- The changing business environment
- The global client
The underserved middle market. As the baby boomers age and spend down their assets, they no longer will be good candidates for traditional financial products and services. So, advisors will need to focus on the age groups lining up behind the baby boomers, namely Generation X and the millennial generation.
Gen X and the millennials may not be as wealthy as the baby boomers, but when you combine those two age groups, their numbers represent a tremendous pool of potential clients.
In addition to serving a market made up of younger adults, advisors will need to focus on middle-market households. These households are described as those with annual incomes between $35,000 and $100,000. Although middle-market households have less money to invest, there are more than twice as many households in this income range as there are in the $100,000-and-up bracket. But because these households have lower overall savings rates, the advisor will need to work with a larger client base to generate the same amount of coverage and investments.
The changing business environment. The voluntary benefits market will move toward serving different types of businesses in 2020. Before the 2007-2009 recession, the industries that drove the U.S. economy were construction, real estate, retail and consumer finance. These pre-recession industries were more likely to be large employers (500 or more workers) with unionized labor.
But the businesses now emerging in the economic recovery are health care, private adult education providers, manufacturers and professional services such as management consulting and administrative services. These emerging businesses are less likely to offer their employees defined benefit retirement plans and other financial benefits such as health insurance or disability insurance.
This shifting business landscape will create a growing underserved market of people who will need insurance and financial products. The challenge is that this market is scattered, so advisors will still need to work with employers to reach these prospects.
The global client. The likelihood that Americans will spend extended periods of time working, retiring or taking medical travel overseas continues to increase.
By 2020, an estimated 20 to 30 percent of U.S. employees will have spent time working outside the country, with the average assignment lasting three years. As more workers take on assignments overseas, it is more likely that advisors will have overseas clients as part of their practice. Those who work abroad will be highly paid employees, and therefore will be highly desirable clients.
As foreign assignments become part of more Americans’ careers, the financial services industry will need to overcome the current prohibitions on serving clients outside the U.S.
The “silver tsunami” of baby boomers into their retirement years, and the reshuffling of the U.S. economy following the 2007-2009 recession, are bringing changes to the insurance and financial services markets. But, according to NAIFA and the GAMA Foundation, “times of great change are also times of great opportunity for those willing to embrace the changes and provide value and service in ways that address the market’s new realities.”