NRI Papers
No.100 January 1, 2006
  Evolution of the US Retail Securities Market (Volume 1)
--Financial institutions prepare for retiring baby boomers--
 
Akira YASUOKA
      In the United States, after 2008, approximately 78 million baby boomers born during the 17 years from 1948 to 1964 will begin retiring at a rate exceeding 4 million people annually.
      There, where most social insurance systems such as pensions and medical insurance are already being handled by the private sector, the burdens of living expenses on retirees are much heavier than are those in Japan. Accordingly, there is an extremely high need for savings to support post-retirement living and their maintenance and management.
      With this situation forming the background, when we see the household financial assets that are on deposit, we find a significant shift to securities investments among older people, in particular, baby boomers. This shift is considered to reflect an investment stance of "long-term investment" to support life after retirement.
      In response, securities firms have shifted the focus of their services from investment services simply to build up assets to advisory services related to the utilization, maintenance and inheritance of assets, etc. with the aim of acquiring baby boomers as clients. Among these new services, securities accounts for which brokerage commissions are not charged, but for which fees are charged based on the balance of deposited assets, are successfully meeting the asset management needs of baby boomers. This is because such accounts can improve the client's outlook for the planning of funds.
      In one type of these fee-based securities accounts, separately managed accounts (SMAs), which are called wrap accounts in Japan, the balance of account has been rapidly increasing in the United States. In particular, unified managed accounts (UMAs), which provide consolidated management for SMAs and other securities accounts, have facilitated the response by registered representatives of securities firms in expanding investment areas as well as offering baby boomers a wide array of asset management options. UMAs are expected to become the core product of asset management accounts in the future.
Contents
I Impact of Baby Boomer Retirement
  1 Accelerated Trends towards Aging in Developed Countries
  2 US Baby Boomers Reaching Retirement Age
  3 Personal Savings Leaning toward Risk Assets
  4 Characteristics of Individual Stock Investors
II Innovations in Retail Sales Operations by Securi ties Firms
  1 Transformed American Securities Industry
  2 Major Securities Firms Aiming at Offering Full Financial Services
  3 Sales Activities of Securities Firms with Fee-based Account and SMAs
  4 Aggressive Moves by Bank-Affiliated Securities Firms and Effective Use of UMAs
  5 Features of UMAs
  6 Changed Revenue Structure of Brokerage Firms

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