The financial services industry needs to do a better job of communicating the importance of planning and saving for retirement, and ensuring investors have access to advice, a panel of insurance industry executives said on Thursday.
Speaking at the 2014 Retirement Industry Conference hosted by LIMRA in Chicago, Robert Kerzner, president and CEO of LIMRA, LOMA and LL Global, Inc., said that despite the industry’s efforts to promote savings products and investment vehicles, research shows that a majority of investors are failing to save adequately for retirement.
“Somehow consumers still don’t seem to be getting the major message,” said Kerzner. “What do we have to do to get through the clutter, to get the key messages out there?”
Part of the problem is the perceived complexity of financial industry products, said Tom Burns, chief distribution officer at Allianz Life Insurance Company of North America. He said the industry should strive to make products simpler and easier for clients to understand.
“Us manufacturers, I think, have caused some of the problems as far as making the products too complex,” Burns said. “I think we have a big responsibility to simplify products, simplify our message out to consumers.”
The industry must also do a better job of marketing and communicating the value of products in a clear and concise way, according to James McCool, executive vice president of client solutions at Charles Schwab & Co., Inc.
“The first step is to start uncluttering the communications, uncluttering the complexity,” said McCool. “Let’s look at it from the consumer’s eyeballs.”
It’s also critical to ensure that investors have access to advice, the panelists said, since investors who work with advisors tend to accumulate considerably higher levels of savings.
As the population of advisors ages, however, it could become harder for investors to access professional advice. Research from LIMRA shows that a third of all financial advisors who are practicing today will be retired in 10 years, according to Kerzner – and there are not enough new advisors are entering the business to replace those who are preparing to retire.
“It really is a concern,” said Burns. He said succession programs are becoming a key area of focus for brokerage firms as they prepare for this demographic shift.
McCool said the industry needs to do a better job of attracting new blood into the business. He said firms and professional associations should find ways of establishing a greater presence on college campuses and in business schools, to encourage students to consider financial planning as a profession.
“Part of the solution is increasing the visibility in this upcoming group,” he said. “Once we talk about what’s going on in this industry, their eyes start lighting up.”
Another potential barrier to advice is a lack of diversity in the advisor force, the panelists said. Specifically, the financial services industry continues to be largely dominated by men, according to McCool. He said the population of advisors should more closely reflect the clients who they are serving.
“That’s got to change,” he said.
The changing regulatory environment threatens to further hamper access to advice, the panelists warned. For example, they noted that steps to ban embedded commissions in some jurisdictions is forcing the industry to revamp its compensation structure, which is driving some advisors out of the business.
“There is this seeming belief among regulators that commissioned advice is bad,” said Kerzner. “We need to give these people more help, and yet at the same time, regulation is fighting against our ability to do that.”