Rather than focus on the traditional notion of saving for retirement, asset management firms serving affluent investors with a minimum of $100,000 to invest and who are between the ages of 40 and 60 should understand that most of these people never intend to leave the workforce, according to Hearts & Wallets.
Thus, the research firm says, a more appropriate goal is to help these investors achieve the financial freedom to quit a job they do not find fulfilling.
“The financial services industry needs to start executing on the reality that many investors don’t plan to retire,” said Laura Varas, a principal with Hearts & Wallets. “Affluent accumulators told us they are saving for ‘freedom money.’ This is a polite version of the term they used to describe the pot of money that will let them walk off the job if someone treats them unreasonably, or if they simply get sick of that job and want to do something else.”
Vasas added: “Knowing they have the option to say ‘bug off’ if they want to gives them tremendous peace of mind that is invigorating, reassuring and even energizing.”
In a new report, “Acquiring Mid-Career Accumulators: Positioning Advice and Disclosing Fees With Upshifting and Downshifting Invesors,” Hearts & Wallets also maintains that asset management firms should better disclose fees, irrespective of the pending 401(k) fee disclosure rule in 2012. “By clarifying the value proposition now, the financial services industry can get ahead of questions that will arise when fees are printed on 401(k) statements,” said Chris Brown, a principal with Hearts & Wallets. “It may take some time, but seeing what they’re paying in their employer-sponsored retirement accounts will give investors the framework to start asking questions about price and value in their own retail relationships, questions that are already very much on their minds.”
The research firm also suggests that each asset management company test various advice models and pricing, including bundled, unbundled, fiduciary, lump sum and hourly rates.
Hearts & Wallets also calls on investment firms to research advertisements and marketing in the industry to determine what their own message should be, and research what it takes to acquire the account of investors whose assets are being rolled over or otherwise in play.
“The major finding with the concept testing was that if your offering is positioned as a service, be a service,” Varas said. “Service companies can describe the services they offer on key dimensions, teach the customer how to evaluate how well those services are delivered and offer choices in pricing to go up or down depending on the customer’s chosen service level.”