According to IBISWorld, the retirement planning industry is predicted to grow at 133.7% from 2010 to 2019 and ranks second on their list of fastest-growing industries. IBISWorld’s senior analyst George Van Horn says, “People need professional advice to manage their money over long periods of time.” Several factors are expected to contribute to this growth.
Demographic Trending Effects
Baby boomers have begun to turn 65 and will continue to do so through 2029 at a rate of over 10,000 per day. A lack of financial education and generally poor preparation for retirement have led to “catch up” provisions allowed in 401ks, IRAs and other retirement plans for those over fifty years old. FINRA Investor Education Foundation’s National Survey of Financial Capability in the United States found that “While individuals increasingly have to take responsibility for their financial security after retirement, the majority of Americans appear not to have done any retirement planning.”
The same study found “The majority of Americans do not have ‘rainy day’ funds set aside for unanticipated financial emergencies and similarly do not plan for predictable life events, such as their children’s college education or their own retirement.” Americans are “clueless about savings goals” as “many workers continue to be unaware of how much they need to save for retirement.”
Effects of Increased Longevity
According to Gallup, the number one financial concern is “not having enough money for retirement.” This fear is perpetuated by two major risks: longevity and inflation. According to the Society of Actuaries Annuity 2000 Mortality Tables, a 65 year old married couple has a 63% chance that at least one spouse will live to age 90 and a 36% chance that one will live to age 95.
A longer retirement makes planning for inflation even more critical. Vehicles, homes, gas, and other basic commodities have increased significantly in price over the past 30 years and are projected to continue this trend. A retiree risks running out of money or having their purchasing power depleted over time without proper planning.
Retirement savings during the accumulation phase depends on a breadwinner’s ability to generate income for the family. One of the greatest risks families face during their “earning” years is the premature death of the breadwinner a need that can be simple to meet with low cost term life insurance.
Industry Demand and Potential
The investment, life insurance and financial advising industry is well established. There are many different products and distribution systems.
Consumers are looking for advisors they trust. According to the 2010 Retirement Confidence Survey, “Institutional Confidence” is lagging. Consumers lack confidence in banks, insurance companies and other financial institutions and are most likely to express confidence in private employers. This provides opportunity for smaller firms who provide excellent service, support and local representatives, to gain market share. In addition to retirement planning there are many other opportunities available to Parsonex franchisees.
Statistics indicate most families are drastically under insured. Approximately 77 million families don’t own life insurance. Of those that own life insurance, one in five say they need more coverage. The average face amount for a husband’s policy is $235,600 and would only replace 3.6 years of income, according to LIMRA International.
Many families own expensive life insurance, as a whole life policy costs 4 to 15 times more than term insurance. This provides excellent opportunities for companies marketing term life insurance to provide adequate coverage at more affordable prices. Additionally, innovative income protection products are beginning to gain a foothold in the marketplace which can provide consumers more coverage at affordable prices.
There are also many other sub-markets in which the owner of a financial services franchise will have the opportunity to engage. These include college planning, estate planning, long-term care, debt management, and other types of financial advising. The key in all markets is providing consumers with a trusted advisor who can help them implement financial strategies consistent with their long-term goals.
In conclusion, the industry is well established with an excellent outlook for the future. Aging baby boomers, the need for retirement planning, and the general lack of consumer financial capability indicate substantial growth over the next decade and beyond.