Retirement Income a Higher Priority for Financial Services Firms

March 15, 2011 ( - New research from Hearts & Wallets, LLC finds three quarters of resources of financial services firms, including budget and management attention, is devoted to older investors.

According to a press release, “After the Gold Rush: What’s Next for Retirement Income: Assessing Market Growth, Solutions and Strategy in 2011 and Beyond” reveals that developing retirement income solutions is vitally or very important at more than half of firms participating in the research. “More than 80% report that retirement income has grown in importance over the last three years,” said Chris Brown, Hearts & Wallets principal, in the announcement.  

The survey indicates the retirement income market totaled $3.3 trillion at year-end 2010, or about 11% of total household investable assets, double what it was in 2006. Hearts & Wallets predicts the market will reach 25% to 30% of all U.S. household investable assets by 2020, unless older individuals continue to work and do not retire.  

The press release said surveyed firms indicate that income planning is now the number one priority. New investment products move lower on the list, although products, which Hearts & Wallets call “Income Feature” products, those producing a guaranteed income such as annuities, are still very important.  

The research examined more than a dozen retirement income planning calculators of firms with the largest market share of pre- and post-retirees. A few firms are beginning to offer investors calculators to help separate “must have” from “nice-to-have” financial aspirations.  

“We are starting to see a shift from ‘what you’ll need’ to ‘what you’ll have’ led by Bank of America/Merrill Edge, which was our favorite calculator, and was just revamped in the fourth quarter 2010,” said Laura Varas, Hearts & Wallets principal, in the announcement.  

More than half of responding firms indicate they plan to adjust fixed-income product lines, while nearly half plan to adjust their equity income offerings. The largest percentage expects immediate annuities to be a part of the solution set.  

“Our data suggests more advisors are recommending annuitization and more plan sponsors are making immediate annuities available to participants,” said Brown.  

Conducted in the fourth quarter of 2010, the survey included executives from nearly two dozen large, multifaceted financial firms with more than $10 trillion in assets under administration, supplemented by public information analysis on innovators and leading firms, and earlier Hearts & Wallets research.