Data & Research June 25, 2010

New Asset Management Target Market: 28 to 64?

The next target market for financial services firms should be those ages 28 to 64 who are intent on accumulating wealth for their future, which may include retirement when they can no longer work. 
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That was a key takeaway from a new Hearts & Wallets survey, which said the market represents 80 million households with $14 to $15 trillion in total investable assets, or about half of all U.S. household investable assets. The study refers to the targeted investors as “accumulators” and asserts they do not consider themselves “pre-retirees.” 

Financial services firm aren’t effectively reaching the market, according to the study. One of three key barriers holding firms back is a lack of peer pressure, which the study predicted would change soon.  

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“The dynamics point to a perfect storm – a large group of investors not saving enough for retirement and for whom current approaches aren’t working and an industry ripe for an innovator to seize market share by addressing the unmet needs of these customers,” said researcher Chris Brown of Sway Research, LLC. “The question is who will win the hearts – and the wallets – of this emerging market force?” 

The study found that few firms have a way of measuring progress with different age groups in a systemic way. In some cases, the industry may misclassify some older investors as pre-retirees even though they are focused on wealth accumulation and do not consider themselves in the pre-retirement stage. The result is a disconnect in the way the industry communicates with these investors and the products being offered, according to the study. The study also found a wide variation in target retirement savings goals.  

“An online experience that results in an unrealistic goal stops action rather than inspires it,” said researcher Laura Varas, of Mast Hill Consulting  “The range across competitors is confusing. Most firms need to do a better job explaining their niche and why they see the world as they do compared to the competition, especially for mid-career savers who like to compare recommendations online.” 

The study, conducted in the first quarter of 2010, assessed the offerings of the seven largest online shareholders of Accumulator relationships and analyzed 20 innovators in the field who have made inroads with Accumulators. It included a survey of executives in 16 financial services firms with an estimated $13 trillion in assets under management or administration as well as assessments of leading online financial services firms and innovators who are addressing Accumulator needs. 

More information is at www.heartsandwallets.com. 

Compliance June 25, 2010

Obama Signs Pension Relief

President Obama has signed into law legislation providing pension funding relief for multi-employer and single employer defined benefit plans.
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An announcement from Congressman Earl Pomeroy (D-North Dakota), who co-authored the pension legislation with Congressman Patrick Tiberi (R-Ohio), said the measure would give relief to employers who are struggling to make payments to their pension plans in the wake of the 2008 economic collapse. According to the announcement, the legislation frees up $129 billion in money over the next seven years that can be used to preserve or create new jobs, and experts predict the legislation will save hundreds of thousands of jobs, while reducing the federal deficit by as much as $2 billion over the next decade.  

The measure provides two alternative funding mandates – amortizing funding shortfalls over 15 years for any two plan years between 2008 and 2011 or paying interest on a funding shortfall for only two plan years that employers choose. However, employers adopting either alternative would have to contribute extra money if they paid “excess” employee compensation or “extraordinary” compensation.  

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The pension relief was included in the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act (H.R. 3962), designed to stave off a 21% pay cut for Medicare doctors until December, instead providing a 2.2% pay increase for doctors who treat Medicare patients. The House approved the bill on Thursday and the Senate approved it last week (see House Passes “Doc Fix” Bill With Pension Relief).

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