Retiring comfortably—the baby boomers’ dilemma

Viewpoints Wealth management
Image: Global mobility

If you're one of 78 million American baby boomers who fear retirement, you're not alone. Ninety-eight percent of baby boomers regret the way they handled their finances during the accumulation phase of their lives, and less than 20 percent have a financial plan in place.1 Although by 2030 this group is expected to control over 60 percent of US net wealth, it also faces decreasing health benefits and increasing health costs, fewer defined benefit plans offered by employers, modest inheritances, a declining savings rate, and economic turbulence.

But baby boomers aren't the only ones concerned with retirement challenges. The impending wave of baby boomer retirements and the ongoing intergenerational wealth transfer have generated intense interest throughout the financial services industry. With 70 percent of assets held by the top 17 percent of boomers and a $41-trillion intergenerational wealth transfer expected to occur over the next few decades, financial advisers need to address the retirement and wealth transfer concerns of their clients now.

The number of wealth managers continues to grow. And while they are producing strong results, they appear to be struggling with how to handle the assets of their two largest client bases: retirees and beneficiaries. Closing the readiness gaps will be difficult: The credit and liquidity crisis has led to big write-downs at many major firms, reducing the capital available for strategically investing in talent, technology and infrastructure, and product and service innovation.

According to a recent survey on industry readiness, 75 percent of wealth managers felt their firm's preparedness regarding dealing with baby boomer retirement issues was a medium to low priority.2 Moreover, 59 percent of the respondents surveyed indicated that among wealth management firms, a financial planning culture that comprehensively addresses life-stage goals is only somewhat present or nonexistent. Essentially, what these statistics tell us is that firms and their financial advisers are not providing a process whereby the boomer generation can benefit from consistent advice.

Wealthstats In light of this lack of readiness, how should financial advisers help their boomer clients? Wealth managers must differentiate themselves through constructive advice and robust solutions. According to the survey, advisory firms should utilize specialists (real estate, international, legal, etc.) to provide a multitude of services-financial planning, philanthropic advice, family education planning, risk management advice, family-meeting facilitation, and robust reporting. In addition, firms should address adviser succession planning because as financial advisers retire, client relationships may become compromised. Last, wealth managers should address the needs of the next generation because their risks and objectives are different from those of their predecessors.

The level of success that wealth managers attain in preparing for the upcoming wave of retirements and intergenerational wealth transfer may significantly increase their long-term profitability-and at the same time benefit boomers facing future retirement challenges.


1David Gaffen, "Boomer market advisor blooms in 2007," Min's B to B, August 2007.
2PwC, Are you ready? Addressing the baby boomer retirement and intergenerational wealth transfer events, October 2008.