You know the facts: 10,000 baby boomers are retiring each day, a significant number of pre-retirees change financial advisers within five years of retirement, and 401(k) rollovers don't necessarily wind up under the management of long-term advisers.
These developments spell opportunity for advisers who focus on the retirement income market. But before we discuss those opportunities, let me tell you a story about the value of having a focus.
In the late 1990s, I worked for the private-client group of a regional investment bank. Many advisers at our firm had great relationships with early-stage business owners whose companies they hoped would go public one day.
The most frustrating event for any of these advisers would be a call from a pre-IPO $250,000 brokerage client ending the relationship.
Typically, the client would phone a month after filing a $30 million initial public offering to say that an adviser from The Goldman Sachs Group Inc. or Morgan Stanley would be managing the proceeds from his portion of the sale. Invariably, the new adviser won over the client by emphasizing a specialization in post-IPO services and in-depth knowledge of restricted stock, blackout periods, corporate stock plans and equity collars.
SPECIALIZED KNOWLEDGE
This points up that if you can demonstrate specialized knowledge to investors in a market that is underserved, you win against competition that isn't specialized. The power is in having a focus.
Because relatively few advisers focus on retirement income, those who do can gain market share.
Consider the experience of John Lynch at The Lynch Retirement Investment Group, a Wells Fargo Advisors FiNet practice. He has built a business around individual retirement account rollovers and structuring retirement portfolios. Now managing a team of nine, he has accumulated $477 million in assets, earning him a spot among Barron's Top 100 Independent Advisors.
Early on, Mr. Lynch built his business by hosting rollover seminars for employees at public companies located near his Fulton, Md., office, including Northrup Grumman Corp. and Verizon Communications Inc. He had success winning the rollovers of middle managers from those companies.
Mr. Lynch's group takes care of everything retirement-related for his clients: It becomes their payroll provider, overseeing direct deposit of Social Security checks, as well as handling the withholding of federal and state taxes. He also calls clients every 60 days to re-balance, which is a byproduct of his non-discretionary relationships.
Mr. Lynch calls himself “a simple guy.” He said that if advisers can find $20 million clients, great, but he will concentrate on doing what he knows.
Gene Stern marketed retirement plans before starting his individual advisory practice in the late 1970s. As more clients sought help with “decumulation,” he launched Innovative Retirement Income Solutions LLC.
Mr. Stern also teams with a third-party administrator/broker-dealer, the Professional Employer Organization, to serve that firm's local clients and prospects who are within 10 years of retirement.
At Savant Capital Management LLC, retirement administration specialist Kim Cady was brought on board to help with the registered investment adviser firm's retirement plan business, which accounts for 10% to 12% of the $2.7 billion of assets that the firm manages. Her knowledge of plan features and participant benefits, along with a retirement library the firm created to provide educational content, help Savant meet the huge education needs of plan participants.
These advisory firms are convinced that their experience and knowledge have helped them retain clients, gather more assets from existing clients and attract new clients.
Looking for retirement income sources beyond financial investments also is part of the job.
Mark Taylan of Silicon Valley Retirement Group, a Wells Fargo Advisors FiNet practice, said that some clients who have modest investment accounts may own several buildings. He and his partner look everywhere for sources of income for their clients, including real estate and cash value of old insurance policies, which brings Mr. Taylan into contact with real estate agents and certified public accountants, who have become a productive source of referrals.
In the retirement income arena, having a focus clearly works.
Gerri Leder, founder and president of LederMark Communications, is a marketing consultant specializing in the financial services industry. She can be reached at [email protected].
