Data & Research March 2, 2010

MetLife Finds ‘Middle’ Boomers Behind on Savings Goals

Although Baby Boomers are typically treated as one big generation, they actually comprise three different demographic groups, according to a new study from the MetLife Mature Market Institute.
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“The MetLife Study of Boomers in the Middle” focused on individuals now 52 to 58 years old and found that, from a business and financial standpoint, the Middle Boomers are looking forward to retirement (setting their sights on age 65), have a high net worth ($100,000 or more, excluding their home value) and are currently in their peak earning years. On the other hand, according to a press release, more than half (54%) say they are behind on their retirement savings goals, and many who have delayed retirement have been affected by the economy.

Most respondents indicated they will rely on Social Security for their retirement income (42% of it, on average). A majority own their own homes, which are worth an average of $273,000, and have an average of six financial products, according to the survey.
One-third of the Middle Boomers expect to receive an inheritance from their parents of an average $181,000, slightly less than the Oldest Boomers and behind the Youngest Boomers, who expect $208,000.

Middle Boomers reported they have experienced a shift in their life priorities in the past five to 10 years—concentrating more on family, financial security, personal well-being, and wellness.

Other characteristics of Middle Boomers the study found include:

  • Turning age 50 was no big deal for the majority of Middle Boomers and they will not consider themselves “old” until age 75. That’s older than the age selected by the Youngest Boomers (age 71), but younger than age 78, selected by the Oldest Boomers.
  • Seventy-one percent of this group are married or in domestic partnerships. Husbands are generally two years older than wives. Twelve percent are divorced or separated, 4% are widowed, and 13% have never been married. Those who are divorced have the most concerns about retirement and income.
  • Like the Oldest and Youngest Boomers, the middle group report they are healthy, with more than half (56%) saying their health is very good to excellent. Looking ahead, though, 26% of those who are healthy say their biggest retirement concern will be affordable health care.
  • Two-thirds of the Middle Boomers report having at least one parent still living, and half still have children living at home. About half also have grandchildren. Seventy-two percent have been providing financial assistance and support to their children and grandchildren, averaging about $38,000 over the past five years. They are not yet empty nesters like the Older Boomers. Fourteen percent are providing care to older parents.
  • The survey was conducted by GfK Customer Research North America on behalf of the MetLife Mature Market Institute in late November/early December 2009, among 1,000 respondents born between 1952 and 1958.

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In Practice March 2, 2010

Schwab Head Optimistic about Poaching from Wirehouses

Bernie Clark, head of Charles Schwab Advisor Services, expects to continue gain more assets from the wirehouse channel, he said at an event today in New York City.
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While traditionally assets move from wirehouse to wirehouse, Clark said more assets are flowing into the independent space (including independent broker/dealers and registered investment advisers). “I do believe it’s not a wave; it’s something that will show consistent movement over time,” he said.

Schwab’s semiannual Independent Advisor Outlook Study, released today, found that 46% of RIAs’ new clients came from full-service wirehouse firms. Surveyed independent advisers reported that clients are leaving wirehouse firms because of lost of trust in their previous firms (65%), followed closely by a desire for more personalized advice (59%).

While custodians such as Schwab have reported an uptick in the number of assets gained from wirehouse firms, industry data show that only a small slice of wirehouse advisers choose to “break away” to the independent channel (see “How Many Brokers Really Went Independent in 2009?”).

Overall, the overwhelming majority of advisers surveyed by Schwab reported gaining new assets in the next six months, with 76% coming from other firms. Schwab remains the largest custodian for independent advisers, with $590 billion under assets as of December 31.

As for retirement plans, Clark said Schwab will continue to leverage any opportunity in the retirement plan arena (about 20% of Schwab advisers work with retirement plans). He told PLANADVISER that Schwab Advisor Services is working more closely with its institutional side; for example, this year Schwab is combining its IMPACT conference for advisers and its ADVANTAGE conference for third-party administrator (TPA) conference.

More Saving

Schwab’s survey found that 32% of advisers think “frugal spending habits” will stick post-recession, followed by “focus on saving money” (26%). However, a majority of advisers (55%) want American consumers to save 9% of their personal income, which is more than the current national savings rate of 4.8%.

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Almost two-thirds (62%) of surveyed advisers reported that their own clients are more focused on paying off debt in the current environment. Another deterrent to saving: the need to take care of children. While only 14% of advisers said their clients are doing more to support their parents in this market environment, a startling 44% said clients are doing more to support their children.

Many advisers (57%) reported that it will be difficult to achieve their clients’ investment goals in the current market environment. However, that is much more optimistic than last year, when 84% felt that way. Advisers have also been able to do less hand-holding; one-third said clients needed reassurance during the last six months, compared to almost half in January 2009.

Clark noted that although advisers might need less assurance, clients are still hungry for more education. “We know from this study that advisers have spent considerable time over the past year communicating with their clients,” Clark said in a release of the survey results. “But while many advisers that we work with say that they are in more of a ‘back to business’ mode, there is clearly a continuing need for advisers to play a role as educators for their clients.”

In January, Koski Research conducted an online survey of more than 1,100 independent investment advisers who custody with Charles Schwab.

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