Baby boomers account for four in five dollars under advice
Tuesday, 27 May 2014 10:55am

Over 55s now account for two-thirds of all financial planning clients, and four out of every five dollars under advice, the latest report from researcher Investment Trends shows.

An aging population and generational wealth differences have made retirees and pre-retirees the pre-eminent markets for financial planners - and, according to Investment Trends' December 2013 Retirement Planner Report, they are set to become even more important in the future.

Based on an in-depth survey of 798 financial planners between October and December 2013, the report reveals that retirees and pre-retirees now make up 66% of financial planning clients and account for 82% of planner funds under advice.

With the number of retirees and pre-retirees set to grow from 6.2 million to 7.9 million over the next 10 years, according to the ABS, the economic importance of this group will continue to increase.

"In 2013, for the first time, retirees held half of all planner funds under advice, up from 46% just 12 months earlier," Investment Trends Senior Analyst Recep Peker said.

"And that's just the tip of the iceberg. With the first wave of baby boomers only just reaching retirement age, retirees and pre-retirees will continue to demand higher levels of planning support for decades to come."

The problem of how to fund this growing segment through retirement is one of the most fiercely debated in the industry today.

The report shows that an increasing number of planners are turning to guaranteed income products such as longevity insurance and annuities.

Thirty-two per cent of planners say they recommended annuities in the 12 months to December 2013, up from 26% in 2012 - and that figure is set to rise further, with 37% saying they plan to use annuities in 2014.

"The proportion of planners recommending annuities has increased, despite the current low interest rate environment," Peker said. "There are strong indications that planners would make even greater use of annuities if some key obstacles were removed."

Forty-one per cent of planners said a higher rate of return would lead them to recommend annuities more often. Other changes that would encourage greater use include the ability to invest without locking in current interest rates, age pension friendly products and more product flexibility.

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