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BY KELLY RIDDELL
Medill News Service | Wednesday, June 07, 2006 | (No comments posted.)
Collective wealth and sheer size have allowed the Baby Boomers to take control of the U.S. economy, and by doing so, redefine conventional banking standards.
Baby Boomers, identified as the segment of the population born between 1946 and 1965, control 70 percent of all wealth carried by individuals in the United States and 80 percent of all financial assets, according to Ken Dychtwald, author of the book "Age Power."
With more than 10,000 Baby Boomers turning 50 every day, non-profit research group SRI International Corp. predicts the number of wealthy Boomers will triple in the next 10 years.
The numbers are making financial services providers sit up and take notice.
Getting special attention: financial planning for retirement, and, in at least one bank, financing a new business.
"The Baby Boomer population is a key focal point of ours," said Christina Favilla, president of Discover Bank, which processes credit cards for Discover Financial Services LLC, a subsidiary of Morgan Stanley & Co. Inc. "Right now we are working on a variety of products that will better suit their needs."
Boomers' demands have shifted from traditional banking services such as checking and savings accounts to more sophisticated offerings such as financial planning.
"In the past the Boomers did a lot of borrowing and as a result the entire financial services industry benefited," Mark Erhardt, vice president of retail products at Fifth Third Bancorp, said. "Now, as the boomers are retiring we need to change our offerings to help meet their new demands."
As a result, Cincinnati-based Fifth Third Bank has established a new product called Passageway, a wealth management program that caters to individuals with more than $100,000 in assets.
"Passageway is a program that provides our customers with the same professional money management services that larger institutions would employ," Erhardt said. "The program is an aggregated investment account that is offered through our brokerage offices and customized to individuals within a certain life-stage."
Erhardt says the product's intention is to simplify the investment process by defining their customers' personal objectives and building a customized plan around them.
"I think what we have experienced so far is that you have a segment of the population that is far more educated and in control of their finances," Terry McCaffrey, president of financial services at Chicago-based LaSalle Bank Corp., said.
McCaffrey says that LaSalle is tailoring traditional financial advice to the individual.
"There is no one-size-fits-all solution," McCaffrey said. "The Boomers are goal oriented, and demand financial advising and planning. They have a specific view and ideas on how they approach retirement and future expenditures."
He says LaSalle is "aggressively expanding" its financial planning services to help the Boomer population determine what retirement looks like for them and how to finance those goals.
LaSalle has also started a group called LaSalle Preferred Services, staffed by a handful of LaSalle employees who are better trained and equipped to handle all financial planning questions if they arise.
"We want to provide the planning, investing, and savings all through one person," McCaffrey says. "If we need a particular kind of expertise we can then draw on the bank at large."
However, not all Boomers have adequately built up their financial reserves to assure a comfortable retirement. These boomers, in addition to requesting financial planning services, are looking for ways to supplement their income as they approach retirement.
"We are seeing a lot of Boomers come to us because they want to start a new business," Selom Nutor, Chicago's regional business banking officer for Washington Mutual Inc., said. "Many Boomers are realizing that they need to have another job or another form of sustenance to help carry them through retirement."
Nutor cites Seattle-based Washington Mutual's small business loan financing as one of the products that some Boomers find particularly attractive.
"Many banks would be afraid to extend a line of credit to someone approaching their 60s to start a new business," Nutor said. "We are different."
Nutor says if a retiree wants to start a business within a field he or she worked in for more than two years, Washington Mutual could extend a line of
credit up to $50,000 with no fees to help get the venture started.
According to the AARP, 80 percent of Boomers expect they will have to work at least part-time during retirement. Nutor suggests starting their own business might be the solution they are craving.
"Boomers need to know that trying to start you own business is not as daunting as you may think," Nutor said. "There are banks and solutions out there."
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