Financial Institutions and Retiring Boomers: Convergence's Payoff or Payback? Retirement Income Industry Association Strategic Study Series December 2008

Strategic Business Insights' (SBI's) Consumer Financial Decisions (CFD), along with Turner Consulting LLC, is pleased to offer the full version of this report to current RIIA members and other institutions interested in learning how their own strategies can be impacted by the financial attitudes, behaviors, and needs of retiring Boomers.

This 48-page report fully presents the research describing the trends and implications of how Boomers in retirement will change the landscape for financial institutions. Taking into account the Boomers' familiarity with convergence and need to consolidate, this report uses three scenarios to describe likely implications and opportunities for specific types of financial institutions. Anyone may purchase the full version of this report for $5000. (RIIA members may purchase this full version at a discount, or download the members' version of this report at the RIIA Members Web site. If you are a RIIA member and would like more information, please contact Deborah Burkholder; +1-617-342-7390.) Also available for purchase are the report data in (dynamic) Excel format for an additional fee of $1500.

If you have any questions, comments, or suggestions about this report, or for more information about ways in which CFD can help your institution, please feel free to contact us.

About This Report

When an industry with too many financial institutions meets retiring households who want to simplify their lives, expect Boomer households to begin consolidating their financial relationships and looking for a few good institutions to meet their financial needs. Since Boomers are the first cohort to grow to maturity and live most of their adult lives with the convergence of the financial industry, all previous trends associated with the retirement transition are open to change. Boomer retirements will likely follow one of three scenarios: Follow in their Elders Footsteps; Continue Relationships with Current Providers; and Move More Business to their Primary Providers. This report describes which scenario is most likely for different markets (Wealthy, Affluent, Mass Market, and Marginals), which institutions stand to benefit, and what opportunities exist for specific financial institutions.

Engagement Strategies for Financial Institutions

Report Introduction

Consolidation changes the relationships between households and their financial institutions. As these changes ripple through the industry, some institutions win business that other institutions lose. This report surveys the landscape today and identifies the institutions which currently win and those that have traditionally lost business as their customers enter the retirement years. Boomer retirements may completely reshape the opportunities for every major institution in the marketplace as they use their wider choices to select other types of providers to meet their needs. The report also discusses the opportunities that are available to institutions that have long-standing relationships with retiring customers to stop losing customers.

Using the extensive consumer research provided by the MacroMonitor, this study explores the ways that the maturing of the Boomer generation will impact financial services firms. Furthermore, the study probes several potential scenarios for the coming change in Boomers' behaviors and attitudes that will significantly impact the financial services community. This study will also provide insight for firms on ways they can use the coming trends to their advantage and position themselves as winners in the emerging marketplace.

To order a copy of this report, download and print the fax order form, fill it out and fax it to +1-650-859-4544, or order online.

For more information about RIIA's Strategic Study Series, this report, or ways in which these findings (and others) may be applied to your needs, please contact:

Larry Cohen
Vice President, Director
Consumer Financial Decisions
+1-609-378-5042
lcohen@sbi-i.com

Elvin D. Turner, JD MBA
Managing Director
Turner Consulting LLC
+1-860-242-4878
turnerconsultllc@comcast.net

Table of Contents

Section Page
Executive Summary 4
Households Start by Engaging Financial Institutions Early 11
Households Use Financial Institutions Through the Stages of Life 13
How Marginal Households Use Institutions Through the Stages of Life 13
How Mass Market Households Use Institutions Through the Stages of Life 15
How Affluent Households Use Institutions Through the Stages of Life 16
How Wealthy Households Use Institutions Through the Stages of Life 17
Households Change Their Institutional Relationships in Retirement 19
The Changes in Relationships that Current Pre-Retirees Can Make When They Retire 22
Changes in Wealthy Households' Relationships in Retirement 24
Changes in Affluent Households' Relationships in Retirement 27
Changes in Mass Market Households' Relationships in Retirement 29
How Financial Institutions Can Stay Engaged with Their Customers 33
Engagement Strategies for Financial Institutions 35
Mutual Fund Companies 37
Financial Planning Companies 39
Banks and Savings and Loans 41
Credit Unions 42
Full Service Stockbrokerage Firms 43
Insurance Companies 45
Discount Stockbrokerage firms 46
Appendix A: RIIA Institution and Advisor Retirement Series 49
Appendix B: Study Participants 51
SRI Consulting Business Intelligence (now Strategic Business Insights) 51
Consumer Financial Decisions 51
Turner Consulting LLC 52

Table of Exhibits

Number Information Page
Figure 1 Number of Financial Products Used by Pre-Retired and Retired Households 5
Figure 2 Average Financial Assets of Pre-Retired and Retired Households 6
Figure 3 Aggregate Financial Assets of Pre-Retired and Retired Households 7
Figure 4 Percentage of Starter Households Using Various Financial Institutions 11
Figure 5 Percentage of Marginal Households Using Various Financial Institutions 14
Figure 6 Percentage of Mass Market Households Using Various Financial Institutions 15
Figure 7 Percentage of Affluent Households Using Various Financial Institutions Data by Age Segment 16
Figure 8 Percentage of Wealthy Households Using Various Financial Institutions 17
Figure 9 Percentage of Affluent Pre-Retired and Retired Households Using Various Financial Institutions 19
Figure 10 Average Assets of Wealthy Pre-Retired and Retired Households Using Four Financial Institutions 21
Figure 11 Average Assets of Pre-Retired and Retired Households Held in Various Financial Institutions 21
Figure 12 Average Assets of Wealthy Pre-Retired and Retired Households Held in Various Financial Institutions 25
Figure 13 Average Assets of Affluent Pre-Retired and Retired Households Held in Various Financial Institutions 27
Figure 14 Average Assets of Mass Market Pre-Retired and Retired Households Held in Various Financial Institutions 30
Figure 15 Attitude of All U.S. Households by Segment: "Would Prefer to Use One Financial Services Company If it Could Meet a Majority of My Household's Needs" 34
Figure 16 Engagement Strategies for Financial Institutions 35
Figure 17 Percentage of Households That View Mutual Fund Companies as Primary Financial Institutions 37
Figure 18 Percentage of Households that Prefer to Use Mutual Fund Companies as Primary Financial Institutions 37
Figure 19 Gap Between the Proportion of Households that Prefer to Use Mutual Fund Companies as Their Primary Financial Institutions & Those that Currently Use Mutual Fund Companies as Their Primary Financial Institutions 38
Figure 20 Percentage of Households That View Financial Planning Companies as Primary Financial Institutions 39
Figure 21 Percentage of Households that Prefer to Use Financial Planning Companies as Primary Financial Institutions 39
Figure 22 Gap Between the Proportion of Households that Prefer to Use Financial Planning Companies as Their Primary Financial Institutions & Those that Currently Use Financial Planning Companies as Their Primary Financial Institution 40
Figure 23 Percentage of Households That View Banks and S & Ls as Primary Financial Institutions 41
Figure 24 Percentage of Households that Prefer to Use Banks and S & Ls as Primary Financial Institutions 41
Figure 25 Gap Between the Proportion of Households that Prefer to Use Banks and S & Ls as Their Primary Financial Institutions & Those that Currently Use Banks and S & Ls as Their Primary Financial Institutions 42
Figure 26 Percentage of Households That View Credit Unions as Primary Financial Institutions 42
Figure 27 Percentage of Households that Prefer to Use Credit Unions as Primary Financial Institutions 42
Figure 28 Gap Between the Proportion of Households that Prefer to Use Credit Unions as Their Primary Financial Institutions & Those that Currently Use Credit Unions as Their Primary Financial Institutions 43
Figure 29 Percentage of Households That View Full Service Stockbrokerage Firms as Primary Financial Institutions 44
Figure 30 Percentage of Households that Prefer to Use Full Service Stockbrokerage Firms as Primary Financial Institutions 44
Figure 31 Gap Between the Proportion of Households that Prefer to Use Full Service Stockbrokerages Firms as Their Primary Financial Institutions & Those that Currently Use Full Service Stockbrokerage Firms as Their Primary Financial Institutions 44
Figure 32 Percentage of Households That View Insurance Companies as Primary Financial Institutions 45
Figure 33 Percentage of Households that Prefer to Use Insurance Companies as Primary Financial Institutions 45
Figure 34 Gap Between the Proportion of Households that Prefer to Use Insurance Companies as Their Primary Financial Institutions & Those that Currently Use Insurance Companies as Their Primary Financial Institutions 45
Figure 35 Percentage of Households That View Discount Stockbrokerage firms as Primary Financial Institutions 46
Figure 36 Percentage of Households that Prefer to Use Discount Stockbrokerage firms as Primary Financial Institutions 46
Figure 37 Gap Between the Proportion of Households that Prefer to Use Discount Stockbrokerage firms as Their Primary Financial Institutions & Those that Currently Use Discount Stockbrokerage firms as Their Primary Financial Institutions 47