Insights to Innovation: Understanding Retirement Trends

The idea of working until age 65 and collecting a pension is no longer a viable plan for retirement. The first wave of baby boomers is forging new ground in their golden years, such as do-it-yourself retirement investing and second (or third) careers as they live longer and in better health. Financial managers who understand how these social and economic factors impact people in the pre-retirement and retirement years will prosper. Here are three retirement trends and how you can harness them.

DIY Investing

Many in this generation subscribe to the self-reliance movement: They don’t need or want a professional to guide their investments. One-third to two-thirds of investors call their own financial shots, according to surveys. Dovetailing this challenge is widespread disillusionment with the financial industry spurred by the 2008 recession. Add fraud predicated by individuals like Bernie Madoff, and it’s not a surprise that only 2 out of 10 consumers in a recent Deloitte study “had a high degree of trust” in any financial institution.^[1]

Some large mutual fund and discount brokerage companies offer low-cost or free financial plans and ad hoc services, which more DIY investors are seeking out as a way to validate their choices. Full-service firms are accommodating consumers of traditional advisor services who want to be more involved with financial decisions by making online financial planning tools and low-cost trading available. And savvy advisors are responsive to clients’ need to hear more of the rationale behind recommendations. ^[2]

Empowered Decision Making

Boomers value living and learning in groups. They want to be empowered to make decisions, says retirement planning expert Robert Laura. They want to hear about what their peers are doing and thinking. They may be motivated by interactive workshops. A format that includes guided questions and interaction with the group and the leader creates an experience that helps build relationships with potential clients. Taking groups to another level, Laura sees group investing as a powerful model for the future. “Imagine the efficiency that comes with working with a group instead of one-to-one with everyone.”^[3]

Entrepreneurship

Motivated by a desire to continue earning or be productive in their retirement, starting a business is a growing trend among baby boomers. According to the Kauffman Foundation, the highest rate of entrepreneurship has shifted to the 55-64 age group.^[4] This trend has promise as a prospecting tool for advisors to help clients with funding and business structure for a start-up. Another pool of potential clients: people who are years away from retirement but want to save now for a business they can bridge to when they exit their current jobs. On the flip side, start-ups present the opportunity for financial advisors to help non-entrepreneurial clients navigate the new asset class of crowd funding.

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