Advisers Move Away from Specialization

In order to adjust with the changing landscape as Baby Boomers retire, financial advisers will likely take on a broader role and compete with a wider array of financial firms.

The root of that trend is “convergence’—the movement from institutions offering financial products separately to most institutions offering similar products, according to a recent report from the Retirement Income Industry Association (RIIA). It’s difficult to predict how financial institutions will be affected by the throngs of retiring Baby Boomers, but advisers can expect the changing field to continue to change, according to the report.

In the past, financial firms were specialized: One went to the insurance company for insurance and the bank to open a savings account, etcetera. That is not the case anymore. The RIIA report, Financial Institutions and Retiring Boomers: Convergence’s Payoff or Payback?, notes that Boomers are the first generation to retire in the post-convergence world.

Part of the challenge for advisers will be shifting to a broader array of products and services, said Larry Cohen, vice president and director of Consumer Financial Decisions, SRI Consulting Business Intelligence, and co-author of the report.

Convergence also means successfully providing a wider set of services to a household, and therefore minimizing the need for multiple relationships. In fact, about 83% of all U.S. households would prefer using one financial services company if it could meet a majority of their household needs, according to data in the report.

Cohen told that people are simplifying their lives. He used the comparison of going to the doctor. While there are many specialists, first you go to the general practitioner. Some advisers might be concerned with maximizing returns, but the “practitioner’ adviser understands that returns are only one part of your financial health. For instance, maybe a client needs disability insurance. “Advisers need to position themselves as part of that smaller group that actually receive business as people simplify their lives,’ Cohen said.

Furthermore, that general practitioner adviser is just as likely to be sitting at a bank or a mutual fund company, added Elvin Turner, managing director of Turner Consulting LLC and co-author of the report. Cohen further explained this adviser model as not a one-stop-shop adviser, but rather like having an adviser as a personal shopper guiding a client around the mall.

In the retirement market, the report says, new types of advisers could emerge, such as retirement income advisers, retirement planners, life-cycle planners, and retirement management professionals whose training and expertise equip them to deliver the analysis and service retirees will be to address multiple emerging issues in their lives.

Financial firms have a bright future, but it’s yet to be seen how they will branch out, the report notes. For instance, it’s unclear where Baby Boomers will turn to for advice and if new advisory brands will emerge. “The boundaries, rules and playing field of this new game are still developing,’ the report says. Whatever the outcome, institutions and advisers can count on one thing: Their roles will be broader than they are today.


Strategies for Financial Firms


Another conclusion of the study is that in the future institutions will need to engage young households, securing relationships in youth and maintaining them over working careers. The report also offers three strategies for all financial institutions to pursue:

  1. Identify the life stages and life events where existing customers are likely to sever their relationship. For many institutions, the retirement life stage is the critical juncture, the report says.
  2. Broaden the services provided through training acquisition, alliance, or partnership. Through acquisition or strategic partnerships, begin offering services you customers and prospects desire but your firm does not currently offer, the report suggests.
  3. Identify the types of customers and prospects that favor your type of institution. The report notes that not all people who prefer to do business with a type of institution are actually customers of that institution. For instance, the report shows that the percentage of households who say they would prefer to use a financial planning firm is higher than the percentage of households who actually use them.

Financial Crisis


Cohen and Turner said the results of their research, which they began before the financial crisis took hold in the fall, remains true since the market meltdown, and might even be exacerbated.

Turner said Baby Boomers were going to be making some important financial decisions that he originally thought would take years. Now the financial crisis has made their financial decisions more imminent. “Again, they will go to the firms that are able to provide a broad range of solutions in the areas they care about,’ he said.



Information about purchasing the report, the third in the RIIA Institution and Advisor Retirement Series, is available at