A news release said the relationship aims to produce investable “strategy indexes,” a category of indexes intended for investors who seek a more active investment approach.
The news release said the Fundamental Index methodology weights securities by fundamental measures of company size, as opposed to using the price-weighted methodology employed by traditional indexes. Currently, approximately $50 billion in assets are invested in products that use non-price-weighted index strategies as the underlying index.
The initial offering likely will be a global index that includes U.S. and non-U.S. exposures. Details on the new series will be issued closer to their launch late in the third quarter.
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The next target market for financial services firms should be those ages 28 to 64 who are intent on accumulating wealth for their future, which may include retirement when they can no longer work.
That was a key takeaway from a new Hearts & Wallets survey, which said the market represents 80 million households with $14 to $15 trillion in total investable assets, or about half of all U.S. household investable assets. The study refers to the targeted investors as “accumulators” and asserts they do not consider themselves “pre-retirees.”
Financial services firm aren’t effectively reaching the market, according to the study. One of three key barriers holding firms back is a lack of peer pressure, which the study predicted would change soon.
“The dynamics point to a perfect storm – a large group of investors not saving enough for retirement and for whom current approaches aren’t working and an industry ripe for an innovator to seize market share by addressing the unmet needs of these customers,” said researcher Chris Brown of Sway Research, LLC. “The question is who will win the hearts – and the wallets – of this emerging market force?”
The study found that few firms have a way of measuring progress with different age groups in a systemic way. In some cases, the industry may misclassify some older investors as pre-retirees even though they are focused on wealth accumulation and do not consider themselves in the pre-retirement stage. The result is a disconnect in the way the industry communicates with these investors and the products being offered, according to the study.The study also found a wide variation in target retirement savings goals.
“An online experience that results in an unrealistic goal stops action rather than inspires it,” said researcher Laura Varas, of Mast Hill Consulting “The range across competitors is confusing. Most firms need to do a better job explaining their niche and why they see the world as they do compared to the competition, especially for mid-career savers who like to compare recommendations online.”
The study, conducted in the first quarter of 2010, assessed the offerings of the seven largest online shareholders of Accumulator relationships and analyzed 20 innovators in the field who have made inroads with Accumulators. It included a survey of executives in 16 financial services firms with an estimated $13 trillion in assets under management or administration as well as assessments of leading online financial services firms and innovators who are addressing Accumulator needs.