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Schwab, Investment Managers Prepare for Retirement Boom

Millions of baby boomers are about to retire and move their money into new vehicles. How will financial advisers cope with the deluge?

When the oldest of the 78 million baby boomers start to retire next year (they will be 62 and eligible for Social Security benefits), they will descend on financial advisers in larger numbers than ever before. "The sheer number of folks approaching retirement is going to increase the need for advisory services and the application of technology to help offload some of the advisory activity," warns Mark Halverson, global senior executive in the wealth and asset management practice at Accenture.

Not only is the volume of work expected to grow, by perhaps double, but the nature of that work will change, too. Traditional tasks of determining a customer's risk-return profile and creating the right asset mix will be replaced with helping boomers ensure that they do not outlive their retirement funds while deciding how much money they should bequest to whom and in what forms. Most clients won't want to be rushed through the process. As such, investment firms are working to equip their financial advisers with the right tools to handle the extra workloads.

"The ratio of households to advisers is one of the key factors that drives the economics of this business," relates Halverson, who notes that the typical adviser handles about 250 accounts. "The obvious interest of the firm and the adviser is to grow the number of households each adviser can realistically serve."

To alleviate the amount of time advisers spend with each client, according to Halverson, most Wall Street firms are trying to create a multichannel environment to encourage clients to do some things for themselves online. "The hope is that you can realistically serve that whole group through that [self-service] process," he says.

Schwab Boosts Adviser Platform

To help the 3,300 independent adviser firms with which it works handle these issues, Schwab Institutional recently upgraded the tools it provides them, including enhanced performance reporting, Web access to scanned customer documents and rebalancing software. "The biggest challenge investment advisers face relates to the scalability of their practices -- how they can service all these new clients in the retirement boom," asserts Dan Skiles, VP of technology at Schwab.

For instance, Skiles says, there's a greater need for performance reporting, in which an advisory firm shows its clients how their investments are doing. "One of the terms you hear a lot is 'de-accumulation' as people retire and begin to spend that money," he relates. As the wave of boomers retire, the reporting process becomes more critical for them, Skiles says.

The information required for performance reports comes directly from Schwab. According to Skiles, this data now is sent directly into the advisers' portfolio management applications. To help facilitate reporting, he adds, Schwab built interfaces to 15 performance management systems into its home-grown Performance Technology for Portfolios software.

Another area in which activity is expected to pick up is rebalancing and asset allocation. "When the client retires, they begin to adjust their asset allocation -- perhaps before they retired they were in a growth model, but now they're going to move to a balanced or value model" so they don't outlive their income, relates Skiles. The key here is to make it easy for the adviser to quickly change. For this purpose, Schwab recently began offering advisers the ASI Portfolio Rebalancing Solution through the Schwab Institutional Web site.

To help advisers handle customer requests while the client is on the phone, Schwab scans paper account documents into a workflow system that it built with several software partners. According to Skiles, Schwab's IT organization currently is working to expose the system directly to advisers via the schwabinstitutional.com portal and combining the documents with account data that advisers already access through the site, such as the status of check requests and funds transfers.

Further, Schwab recently rebuilt its adviser interface for opening new accounts to allow data from previous accounts to be automatically uploaded. This saves the advisers rekeying and lets them complete the new account opening process within a day, Skiles notes.

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