For years and with good reason, the media has been tracking Baby Boomers as they enter each new phase of their lives. The population explosion, which occurred when soldiers returned home from World War II, has had an enormous impact on the U.S. economy ever since.
For years, there has been speculation about the impact of Baby Boomers approaching retirement, which is occurring now. For financial advisors, this offers a tremendous opportunity to manage these assets. The number of retired households still falls below 50 percent, which means there is time to get your piece of the Baby Boomer pie, but you need to act now.
As Baby Boomers begin to retire in greater numbers, they will be shifting considerable assets from private retirement plans and corporate accounts into the realm of the financial advisor. We’re talking about assets of more than $12 trillion dollars. This provides a tremendous opportunity for advisors, but taking advantage of this will require a clear understanding of investors’ needs and a plan to help get them on the right path.
According to a 2014 report by Spectrum Group Research, there are 38.5 million Baby Boomer households that will potentially have the need for a financial advisor. The Spectrum Group’s research also indicates that half of those investable assets are being managed by an advisor. This means there are more than $6 trillion in assets still on the table.
Many advisors have seen firsthand how the retirement of Baby Boomers has positively impacted their business. The remaining question centers around how to capitalize on what’s still out there. Now that Boomers are older, their needs have changed. They are no longer buying family homes or trying to put their children through college. Concerns about long-term healthcare, estate planning and sustaining sufficient cash flow are prevalent. Advisors need to be ready to address these concerns as part of the financial plans they create for their clients.
Two items that top the list of concerns for retiring Boomers are: being able to sustain the quality of life they have grown accustomed to during their working years and uncertainty about whether they will outlive their money. Another concern steadily rising in recent years is the cost of healthcare. Even with Medicaid and Medicare, older individuals still need to plan for unpredictable healthcare needs that will come at predictably high costs. Financial planners need to address these concerns by advising their clients to have adequate long-term health insurance. They also need to make sure a part of each client’s portfolio is solely dedicated to covering future healthcare costs.
Realigning investment strategies with these new goals will be critical for the success of both financial advisors and their clients.
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