Financial services companies are facing the risk that the retirement of the baby boomers will disrupt existing retirement businesses as retirees move assets out of current retirement accounts and into new, income-generating products. Companies hoping to capture a disproportionate share of this "money in motion" and establish a robust position in the retirement income market must first address internal issues around operations and products, according to Deloitte's Mining the Retirement Income Market point of view released today.

"Retirees are more concerned than ever about their ability to generate income that will last throughout their retirement, giving insurers an opportunity to develop new products designed to mitigate uncertainty about retirement income. Insurers face a critical decision about whether to unbundle insurance coverage from asset management offerings and how best to achieve this because their ability to assume these risks is a core strategic advantage over players in the other sectors," said Rebecca Amoroso, head of Deloitte's U.S. Insurance practice.

"The dominant position of the largest mutual fund companies in the defined contribution plan market means this sector has the greatest exposure to asset erosion as the baby boom generation retires. But they are also in a potentially good position to capture rollover assets. Still, mutual fund companies will likely need to reposition and broaden their brands for the retirement income market," said Cary Stier, Deloitte's U.S. head of Asset Management Services.

"Because most people view their banks as their primary financial institution, the industry is uniquely positioned to capitalize on its extensive existing customer network and establish a role in planning and managing retirement income programs," said Jim Reichbach, Deloitte's U.S. head of Banking and Securities.

In the paper, Deloitte offers 10 key actions financial services companies should consider as part of a plan to potentially succeed in the retirement market:

* Build your end customer knowledge. Insight into consumers' concerns, preferences and behaviors is necessary to determine what is lacking in the current market and to develop creative solutions that fill the gaps. Start by analyzing information from existing customer interactions and transactions and supplement with primary consumer research and external consumer databases.
* Decide where you want to play. Segment and size the market to identify customers, products, services and channels that offer your company the greatest opportunity for profitable growth.
* Define and communicate your brand. Craft a value proposition -- product and customer experience -- that is customized to the needs of your target market and that differentiates you from the competition. Develop a message and select media that address the distinctive perceptions and attitudes of your target segment.
* Enhance your product development capabilities. Products need to be brought to market more quickly and efficiently in the future. Involve customers and distributors up front to test market concepts and features. Engage IT, operations, risk management and legal early in the development process to prevent downstream problems.
* Align sales and distribution channels and incentives. Analyze the cost to serve distribution alternatives and understand the sensitivity of these economics to changes in such factors as volume, compensation structure and consumer acceptance of new media and channels. Evaluate independent distributors. Focus on the most profitable channels.
* Equip your financial advisors. Ensure that financial advisors who represent you have the education, tools and incentives to provide advice and service to end consumers that is appropriate and consistent with your brand.
* Adapt your service delivery model. Start with an audit to assess the quality and consistency of your current customer experiences and identify gaps with your brand promise. Analyze the cost of alternative solutions versus the pricing inherent in your product/value proposition.
* Strategically align the IT infrastructure. Resist the pressure to respond to changes in business needs with systems and solutions that are deployed with tactical objectives as this commonly leads to duplication of infrastructure across business units and departments. Focus on a long-term portfolio of initiatives that balances short-term benefits with sustainable long-term restructuring.
* Develop a reinforcing culture. Clearly articulate the vision from leadership, understand what capabilities and attributes employees will need to deliver it and align recruitment, training, performance measurement, incentives and organizational structure to reinforce these values.
* Measure performance and modify your approach. The retirement income market is just emerging and how it evolves will depend in part on how financial services companies respond to the challenge. Ensure the appropriate "learning loops" are in place to evaluate how consumers are responding to the value proposition, and be prepared to modify and adapt the approach on an ongoing basis.