Over the past several years, consumer segmentation has started to become somewhat more sophisticated for the retirement income market.
Income, net worth and investable assets continue to be the primary criteria for targeting consumers and tailoring retirement income products and solutions. However, other information elements are beginning to enter the mix. This enables marketers to further prioritize target consumers and to make the relationship between advisor and client more effective.
To be sure, a consumer's financial profile provides the financial advisor with tangible and observable characteristics. These factors are easier for advisors to apply than are other characteristics. Financial criteria do not, however, address the emotional dimensions inherent in consumers' decisions surrounding use of their money.
How, then, do financial advisors identify and leverage those emotions?
In the past, the financial services companies were the ones that developed calculations to help determine whether a consumer should feel comfortable or uncomfortable with his or her retirement savings and its sufficiency to generate a lifetime stream of income.
However, a consumer's self-defined attitude towards retirement savings is both more practical and more powerful than how others may choose to categorize them.
This point came through in a 2006 consumer survey, conducted by Diversified Services Group, of 628 pre-retirees and 600 post-retirees, ages 55-70, with investable assets of more than $250,000. The survey explored whether these consumers were comfortable or uncomfortable with their financial futures, plus many related factors. The goal was to spot underlying issues contributing to consumer attitudes and how such attitudes affect retirement objectives and worries, current ownership and anticipated use of retirement products and solutions, and relationships with financial advisors.
Overall, two-thirds said they were comfortable with their financial futures. However, for financial advisors, the one-third who said they were uncomfortable are much more interesting.
Consider: While comfort levels do increase with investable assets, significant numbers of consumers remain uncomfortable–even at the higher asset levels. In fact, 25% of people age 55-70 with investable assets of $750,000 to $1 million and 18% of those with over $1 million said they feel uncomfortable about their financial future (See Figure 1).
In addition, consumers who deem themselves uncomfortable are significantly more likely to be dissatisfied with products or solutions chosen to provide retirement income. (See Figure 2).
As a result of these and other DSG findings, it appears that knowing prospects' comfort level with their financial future is an important element that financial advisors can use when delivering appropriate retirement income information and solutions.
