A Niche in “Modest” Families?I recently read a New York Times article that explores the possibility of focusing a financial planning practice on what the author called “modest” retirement accounts. (http://tinyurl.com/av5lvw9) Of course, what quantifies as “modest” assets to one person could be seen as “great” wealth by another. For Baby Boomers, the market crash and recession couldn’t have come at a worse time, the article said. Many saw retirement savings decimated with some losing half their net worth — and with it half their nest egg. A boomer who once had $500,000 for retirement now has something more like $250,000. Is there such a thing as “too” small of a client? These “modest” families need investment advice, but for some advisors and financial institutions their assets might be considered too small to qualify as a client. The issue the Times article raises is where do they turn for help with their investments? For clients with less than $1 million, advice has typically been hard to find. But in recent years, investment advisory companies for people with modest nest eggs has become a growth industry. At the end of 2012’s third quarter, there was $5.3 trillion in IRAs compared with $5 trillion in 401(k) and similar plans, the Times said. In contrast, there was $4.8 trillion in government retirement plans and $2.6 trillion in pensions. The point: there is lot of wealth inside these plans that need investment help. What about long term care planning? The author’s point is a good one. There may well be a niche for the intrepid financial advisor who can build a planning practice helping families with “modest” assets. But one issue that I think the author missed was also helping those modest families with long term care issues. How do they afford to pay for medical care for such as dementia or other chronic age-related issues putting families in crisis? The costs of nursing home care will outgrow the possible growth of any “modest” family’s retirement income that flows off of retirement assets. The need to help such families not only grow retirement assets but proactively prepare for long term care costs is a significant niche in itself. What do you think? You can’t help but wonder with the breakthroughs in technology that there may be more cost effective platforms to deliver services and advice to this niche. The author mentions several companies using technology as a key to focusing in this market. We hope this information was useful to you, your clients and their families. To get more information regarding this or any related topic, please visit our website www.TEPLG.com or call us at 630-871-8778.
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