The 50-and-older crowd now makes up one-third of the U.S. population, according to the U.S. Census, yet these consumers control three-quarters of the country's investable assets. For these two reasons alone, financial advisors are eager to better understand this generation and create ways to serve them most effectively.
Indeed, advisors will be working with the over-50 set for many years to come as baby boomers age and join their ranks.
As any financial advisor knows, though, people require different messaging at different points in their lives. Without segmenting their client base, which might be perceived as insulting, it's important for advisors to put their clients into the appropriate physical, mental, and societal context.
To address the need for this type of education among advisors, the Insured Retirement Institute (IRI) and AARP teamed up to educate advisors on how to meet clients' social, generational, and family challenges as they age.
"We were getting unsolicited calls from advisors asking us to tell them more about our membership," said Jean Setzfand, director of financial security for AARP. "There is such a hunger for information about older Americans."
What is older?
But how exactly do you define "older"? The meaning of age is often in the eye of the beholder, and advisors may be perplexed about whether their clients are indeed "older." For some, older is defined as 50 and above, as this age is often a trigger point for significant physical and mental changes. Yet "older" has other definitions, depending on the context. For example, where workplace discrimination is concerned, an older worker can be someone over 40. AARP membership starts at 50. Eligibility for Social Security begins at 62 – and so on.
"You need to be careful," Setzfand said. "Some people may not see themselves as old."
Of course, a client's age isn't the only factor that determines what and how advisors need to communicate; life stage plays an equally important role. This is especially true of baby boomers who, although they're now entering the 50-plus group, look very different from past generations at this age. These 50-somethings may still have children living at home, or they may be caregivers for elderly parents – or both. They may consider working long past the traditional retirement age, or may plan to embark on a revolving retirement, coming and going from the workplace as their lifestyle and financial needs change.
A holistic approach would help advisors understand individual family circumstances and inform the best plan. In these cases, advice may go beyond what is considered traditional investment advice.
"There will also be legal aspects to your relationship with your clients," Setzfand said. "You may be looking at powers of attorney, guardianship, or professional caregivers, and that's important to keep in mind."
In addition to better serving clients, developing a relationship with the entire family can position the advisor to benefit from the intergenerational transfer of wealth that is now occurring. Despite the economic downturn, the traditionalists (those now in their 70s) and boomers are expected to pass on $38 trillion in wealth to their heirs and charities between 2011 and 2035.
"This would represent the largest intergenerational transfer of wealth in U.S. history," according to a recent Edward Jones report.
