Boomers May Not Embrace Aging, But Investment Firms Can't Wait

The first of the baby boomers (born 1946-1964) registered for Social Security in October 2007. Over the next two decades, the boomers will retire, and the fight is on for their retirement savings. Financial Services researcher Cerulli Associates projects new IRA rollover contributions will increase from about $300M per year now to over $400M per year in 2012.

Over the coming decade or two, there will be trillions of potential rollover dollars in play for the investment industry. Employees hold almost $7 trillion in 401k, 403b, private pensions, and other employer-sponsored retirement accounts. Boomers’ money in these plans has to roll somewhere as the boomers retire and leave the labor force.

Companies offering IRAs, including investment firms, banks, and insurers, will rake in new accounts and assets from the flood of rollover money. The battle for share of online rollover dollars is up-for-grabs.

Table 1 shows the top sites receiving referrals from key search terms like "401k rollover," "rollover IRA," and "IRA rollover."

Two key takeaways from these data:

  • Informational sites dominate. Consumers are seeking help in understanding their options from sites with strong investment content, including and
  • Only 3 financial services firms — T. Rowe Price, Bank of America, and Fidelity Investments — are ranked among the top 10 for any of the search terms (we can add TD Ameritrade to the list if we expand the search terms to include "IRA" without the term "rollover").
    • The implication is that investment providers’ paid search campaigns are not particularly effective at driving site traffic.

In terms of assets, Fidelity is the current leader in the IRA space with $539B; Charles Schwab and Wachovia are distant runner-ups. Schwab is on the radar for online referrals, showing up in the top 20 for all the search terms above. Wachovia, however, appears to be bypassing online IRA advertising entirely — likely a strategic move consistent with their model.

I would hypothesize that scalability is going to be the biggest obstacle for investment providers as millions of boomers move out of the workforce. The online channel is central to growing a scalable retirement business and these preliminary data suggest a tremendous opportunity for the first investment provider who develops an effective and efficient online go-to-market strategy.

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