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Baby boomers are tough customers.
The financial services industry is not effectively marketing its products and services to baby boomers and faces a huge obstacle in keeping them as customers, because they aren’t loyal to financial institutions.
[Investment News] Those were among the conclusions at the What’s Next Boomer Business Summit co-sponsored by the San Francisco-based American Society on Aging.
“If you are in the financial services industry, this is the baby boomer decade,” said one speaker, David Baxter. He is senior vice president of Age Wave, a San Francisco-based think tank that analyzes the business, social and cultural implications of aging.
Many baby boomers have lost the loyalty that their parents had toward financial institutions because of the constant mergers in the industry in recent years, said Vicki Thomas, president of Thomas & Partners Co. Inc. in Weston, CT.
She recalled when New York-based American Express Co. spent significant time and money marketing its brand for Minneapolis-based American Express Financial Corp. But in May 2005, that unit — which included American Express Financial Advisors Inc. — was spun off and changed its name to Ameriprise Financial Inc.
There are dozens of these examples in the industry, and it makes it tough to create brand loyalty, Ms. Thomas said.
Since baby boomers aren’t loyal to their financial institutions, there is opportunity for companies to recruit new customers, said Ann Hannon, vice president of Harris Interactive Inc. of Rochester, N.Y. But she said financial institutions must work harder to keep these customers. [read more]
“People feel good about their relationship with a financial institution,” Ms. Hannon said. “But they’re not committed. There’s no strong personal relationship with the financial services industry.”
Ms. Thomas agrees. “The boomers market offers a huge opportunity for growth and deeper relationships. But you’re not seeing a lot of the financial institutions do that,” she said.
Another challenge the industry faces is improving its efforts to recruit women as customers.
“One of the big things is [that] the financial services industry is missing the women market,” Ms. Thomas said. [read more]
A huge percentage of women are overseeing household banking and all financial decisions, she said. Many women also are banking online, Ms. Thomas added, and she believes the financial services industry needs to target products to women.
Fifty-one percent of women don’t have a spouse, and Ms. Thomas said that less than one in five women actually have a financial adviser — which leaves open many opportunities for advisers.
It’s crucial to focus on the baby boomers, Mr. Baxter said, because in every decade, they’ve changed spending tremendously — beginning when they were babies and sales of baby food skyrocketed.
He said the 1950s were defined by their childhood, the 1960s were defined by their teen years, and this decade will be defined as the baby boomers’ pre-retiree years.
“Boomers are at their peak for economic and social power,” Mr. Baxter said. “This is the time for innovation and challenges. The winners will be the ones who connect with this generation.”
Marketing to boomers is important, and realizing that their spending habits are completely different from their parents is crucial, said Emilio Pardo, a chief brand officer with AARP of Washington.
Part of the challenge for the industry is to market to boomers in a way that dispels many of the myths about aging Americans. “We’re leading the consumer revolution,” said Mr. Pardo, a baby boomer. “That changes the way we do business.”
Mr. Pardo said that financial services officials who believe that baby boomers are “set in their ways” will miss out on opportunities and new sales. He said that some 60% of people over the age of 40 research different brands of products before making a final decision.
Mr. Pardo also dispelled the myth that baby boomers are technologically challenged and said that many of them are quite comfortable surfing the Web and enjoy shopping online.
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