Lucky boomers. They may be getting older, but they're also getting richer, at least as a generation.
Boomers make up the wealthiest generation in history and will control about $40 trillion in retirement assets by 2020. Yet, individuals in this generation face uncertainties about how they will fund their retirement and how wealthy they will be during their golden years.
Clearly, those who fail to plan accordingly now will fall short of their expectations later.
Similarly, the companies that serve the boomer market run the risk of missed expectations, according to "Retirement Study 2008," a new survey from Diamond Management & Technology Consultants, Inc. Unless they consider new strategies now, financial services firms, insurers, and health care payers won't survive in a changing health/wealth market.
"Banks, financial services firms, and insurers have an enormous opportunity in front of them, and they need new capabilities to create the tools and services boomers need," stated Aamer Baig, managing partner of Diamond's Financial Services practice and a co-author of the study. "Boomers need help preparing for retirement, because many lack a strong financial acumen and a rational, long-term approach to do the right thing."
In the study, Diamond analyzes how the convergence of health, wealth, and risk management is creating new business opportunities for companies that adopt a wider vision of the services they offer and a more precise view of the boomers they serve.
However, the research shows that many companies are not prepared right now to take advantage of those opportunities. For instance, 89 percent of insurers believe that making products simple for their customers to understand can be a competitive advantage, but only 23 percent believe they have effectively developed that capability.
Seventy-seven percent of financial advisors see speed-to-market in bringing new products and services to boomers as a potential competitive advantage, but only 20 percent currently have that capability.
Eighty-nine percent of the bank respondents say that pricing is somewhat or very important as a competitive factor, but only 51 percent said that they have the capability to make it a competitive advantage.
The bottom line is that companies competing for all that boomer wealth will need business and technology platforms flexible enough to accommodate different boomer market segments, new types of transactions, new federal and state regulations, and competition from multiple fronts.
In addition, the Diamond survey shows that companies in these industries will need to look at the boomer generation not as a whole, but as segments with unique needs.
Diamond surveyed 626 consumers aged 45 and older, asking questions about their health and finances, as well as their attitudes, behaviors, and current situations. It also surveyed executives at 105 banks, investment firms, and life insurance companies, each with revenues of more than $500 million, to understand how those companies are pursuing this market.
The survey clearly shows that boomers are not a homogeneous group, and companies cannot treat them that way. Different segments of the boomer population have specific needs rooted in their unique attitudes and behaviors. Diamond refers to these segments as Affluent Sophisticates, Aspirants, Retired Settlers, Moderates, and Survivors.
"Companies will not be able to adopt a 'one-size-fits-all' approach toward serving the market," Baig said. "They will need to thoroughly examine the value chain to determine where they are best positioned to meet customers' emerging needs, tailoring their offerings to targeted sub-segments of the boomer population."
For example, Affluent Sophisticates, who make up 25 percent of the boomer population, control 65 percent of boomer assets. Conventional wisdom says that this group appears to be a clear target for companies, but a closer look reveals that many companies already have targeted these consumers. Therefore, not every firm can serve Affluent Sophisticates and be profitable, and many companies will need to make strategic decisions about which segments to target.
A copy of the "Retirement Study 2008" is available by contacting the Diamond Management Web site.
|
