Seniors Have Assets, But May Not Have Comprehension

In 2020 the baby boomers have the assets of America. The flower children of the 60s are now the power seniors in their 60s. The vast majority of financial professionals want to do business with the boomers. They may very well be the richest demographic that ever lived in the U.S. Their 401(k)s are stuffed with stocks, bonds, ETFs, Mutual Funds, REITs and perhaps even annuities. But they know nothing about the assets they own, the risk that they bare and rebalancing of portfolios.

This is a significant opportunity to educate the public on the basic fundamentals of money management. The real problem though doesn’t lie with the ignorance of the boomer, that’s a given, but ignorance of the advisor. It’s amazing to observe an arbitration case or court room lawsuit. Often the client fanes or actually is ignorant on money issues. That’s not a surprise since we don’t teach finances as a requirement in high school or college. But if you can’t explain your product recommendations by asset class, beta risk, weighted portfolio, etc., you’ll be dead in water at the hearing. If you can’t explain it under an intense review proceeding, you couldn’t have explained to the client correctly.

The inability to explain what you sell often falls into a suitability issue because the client feels (rightly or wrongly) that they wouldn’t have purchased the asset if they had known the ins and outs of the product. If you don’t know it, your errors and omissions insurance may not pay out benefits.