Peak Accumulators Don’t Look Far for Advice

Investors aged 28 to 52—those in the prime saving and asset accumulation phase of life—aren’t looking far for help making investment decisions.
In fact, those investors are more likely to turn to themselves for investment information and advice than any other sourceincluding financial professionals and their employers, according to a new report.
The new research report, Capturing the Hearts & Wallets of Peak Accumulators, notes that, despite being the engine of future economic productivity, these investors (the so-called Core Workforce), are largely being overlooked by the investment industry, including asset managers, insurance companies, banks, and brokerage houses.
The 57 million households in this population segment currently have $5.2 trillion in investable assets across bank, taxable brokerage and retirement accounts, according to the report, although assets are currently concentrated among the nine million most-affluent households, which represent $4 trillion of that asset base.
“This unheralded demographic is quietly looking for new products and services to support their savings goals, but most are not seeking professional advice,” explained Chris Brown and Laura Varas, authors of the report. “Many investment professionals have been so focused on older investors that they are at risk of missing an entire generation.”
Hearts & Wallets is a new partnership from Brown of Sway Research and Varas of Mast Hill Consulting.

Segment Characteristics
In conjunction with the study, the authors conducted a national survey of more than 800 investors aged 28 to 52, which found:
  • 54% find it “difficult” or “very difficult” to “find the right resources for getting help with financial questions;”
  • only 18% work primarily with a financial professional, such as a broker, registered investment adviser, insurance, banking, mutual fund or online brokerage representative;
  • 78% consult friends and family at least “sometimes,” but only 28% say “my friends seem to know how to invest;”
  • 84% are “concerned” or “very concerned” about the “future of Social Security;”
  • only 5% “agree strongly” that “my employer is responsible for providing for my retirement;”
  • only 9% “agree strongly” that “I’m on track to accumulating the savings I’ll need to retire.”
“The core financial task of mid-life is to establish stability and accumulate savings, but Core Workforce investors don’t feel they can rely on their employers, the government, or the financial services industry to help them, so they are turning to themselves, friends and family for advice … even as they recognize the limited value of that advice,” added Brown and Varas. “This level of wariness has profound implications for the financial services industry and will transform the delivery of investments in the future for firms that understand how to recalibrate their approach.”

Retiree Focused
According to the report, Younger Boomers (age 43 to 53) have more in common financially with Generation X (age 28 to 42) than with Older Boomers (age 54 to 62). Yet a 2007 survey of more than 30 firms with $14 trillion in assets conducted by Mast Hill Consulting found that 60% of industry “effort and investment” is directed to pre- and post-retirees, especially Older Boomers, while only 12% of industry “effort and investment” is dedicated to Generation X.
“Overemphasis on Older Boomers hurts prospects for future growth when it comes at the expense of programs that help the Core Workforce succeed with the mid-life task of achieving solid financial footing,” added Varas. “There is a role for both private-sector and public solutions.”
The report segments middle-aged investors into three behavioral groups, and claims that the most attractive segment, Peak Accumulators, engages in six constructive financial behaviors:
  • they spend less than they make
  • have an emergency fund
  • contribute something to a retirement plan each year
  • own their own home
  • have their insurance needs covered
  • have little or no credit card debt.

“While others focus on serving Older Boomers, there is a terrific opportunity for nimble, forward-thinking service providers to re-connect with this audience and establish a first-mover advantage. Because the Core Workforce is so large, small changes in behavior could mean asset growth will rival or exceed that of pre-retirees. After all, organic growth is easier and potentially less expensive to achieve than wresting share from competitors, which is required when working with older investors,” concluded Brown.



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