Baby boomers will be very different retirees from the retirees whom advisors are accustomed to serving.

In the previous issue of Investment Executive, I talked about two traits that mark boomer behaviour and that boomers will take into retirement with them: the view that they can have it all; and the questioning of authority and boomers’ unwillingness to accept at face value what they are told.

It doesn’t stop there. Reluctance to give up control, the desire to keep options open and the quest for value are also characteristics that distinguish boomers.

> Reluctance To Give Up Control. On important issues, baby boomers are extremely reluctant to give up control.

Look no further than the way baby boomer parents are hyper-involved in their children’s education, more than any previous generation. I’m referring not only to the early years of schooling, but also to university education. Take the phrase “helicopter parents,” which describes parents of university students who continue to hover over their children.

When conducting research with affluent retirees between the ages of 50 and 70, my conversations with retirees in their 50s and early 60s had a very different feel than conversations with retirees in their late 60s. The older retirees were more traditional; although more knowledgeable and aware than past retirees, they generally deferred to their financial advisors when it came to financial decisions and let their advisors take the lead.

The younger retirees — while they looked to their advisors for advice and guidance — tended to be much more involved in the decision-making process and looked for more frequent and open communication than would have been the case in the past.

One reason is the access to information provided by the Internet. The real impact of the Internet lies not in changes in where people go to buy but, rather, in how they buy. When conducting interviews with affluent retirees, I was struck by the number who went online each morning to check how their investments had done the previous day.

This is not good news for many advisors, who are already under the gun on short-term performance. Try as you will to discourage clients from focusing on day-to-day market events, you’re in denial if you think you can persuade all of your clients not to check their results on a daily basis.

So, if you don’t offer online statements and real-time tracking of performance, think about how you’re going to offer clients real-time updates. If your firm doesn’t offer online statements, there are third-party services that allow you to enter a client’s holdings and then permit clients to monitor the performance of their holdings daily.

The implications for advisors dealing with boomers in retirement are clear: do whatever it takes to help clients feel in control of their financial future.

Another spinoff of the quest for control will be a growing demand for streamlined financial plans that clearly lay out the options for clients. Note that what boomers — and, in fact, all clients — want is an easy-to-understand summary that you review with them, not a 60-page report with dense type and charts. This summary will show where clients are, relative to their goals, and what the options are to close any gaps.

There are, of course, some superanalytical clients who are exceptions to this, but these are relatively few. If you prepare an in-depth plan, consider giving it to clients as a separate addendum to the executive summary. But be prepared for clients to take this addendum and file it away, never to be seen again. Of course, there may be value in giving clients all the details, so they understand the level of work that you have done. And it will lend your recommendations greater credibility. Just don’t expect them to slog through the details.

CLARIFY THE OPTIONS

Not only do financial plans increase the sense of control that boomers feel about their financial futures, they also clarify the options for those with the “I want it all” mindset. Such people have unrealistic objectives for retirement; this will be a wake-up call.

So, if you aren’t set up to deliver detailed financial plans, now is the time to start.

One final impact of boomers’ drive for control: be prepared for more frequent, open and honest conversations with your clients. To the extent possible, ensure that you initiate the communication — clients assign much more value to proactive contact than to responses to their requests.

@page_break@Going forward, there will be no secrets. A physician friend recently told me about the online research his patients do whenever he diagnoses serious ailments. His patients are looking for further explanation and, sometimes, exploring alternative treatments.

The result: in the future, you have to be prepared to be absolutely open and transparent on compensation and other details that may have been masked in the past.

> The Desire To Keep Options Open. The second key trait that defines boomers’ attitudes toward financial advice is the desire to keep their options open. A recurrent theme in the interviews I have conducted was concern about getting tied into investments or life insurance solutions from which interviewees would have difficulty extricating themselves. This has major implications for selecting products to present to baby boomer retirees — and even more profound implications for the manufacturers developing those products.

> The Quest For Value. The final character trait of baby boomers is, for some, the scariest of all. Never have we seen a more fickle, more value-oriented consumer. It’s not that boomers have no loyalty but, rather, that traditional relationships are much less important than ever before. On important issues, boomers make a hard, cold assessment of the value they’re getting from providers compared with the alternatives. If they feel they’re being shortchanged, they speak with their feet.

As an example, look no further than the massive defection of “GIC refugees” from the banks to independent advisors in the 1990s — or, more recently, from savings accounts at banks to alternatives such as ING Bank.

Going forward, advisors need to be prepared for tough-minded scrutiny of the value they bring. Those who provide superior value will be richly rewarded; those who fail to pass the value test will be severely punished. And even if you offer superior value today, you’ll still be put to the test tomorrow. Powerful brand icons — such as Toyota, BlackBerry, iPod and Starbucks — prosper only as long as they are seen as providing better value than the available alternatives.

To make this even more daunting, what is seen as differentiated value today (regular proactive contact, for example) will be seen tomorrow as the minimum that clients expect. The quest to have clients see us as providing better value each year than in the year before will be a never-ending one. In many regards, the transformation of our business from primarily relationship-driven to primarily value-driven may be one of the biggest shifts that lie ahead of us.

For those advisors who think today’s clients are about as demanding as they can get and that we’ve seen all the changes that we could possibly see, in the words of the immortal Al Jolson: “You ain’t seen nothing yet.” IE



Dan Richards, president of Strategic Imperatives Ltd., can be reached at richards@getkeepclients.com. For other columns in this series, go to www.investmentexecutive.com.