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Creating Boomer Products - Take a Lesson from Gen XY and AmEx One

By Mike Ma

I just returned from a trip to Toronto and Montreal and have spent a lot of time talking about our Boomer study with our Canadian clients. Canadian firms are just as worried about their Boomers as we are stateside.

One of the things that we spend a lot of time talking about is creating truly differentiated products for the boomer market. In the study, we make a couple of key points about the asset management industry:

- Boomers are full of paraxoical values and they want all of it at once (e.g. wine is a great boomer product since it promotes luxury and health all at once. Are these business results a suprise?)

- There is a lack of truly differentiated products for boomers

- There is a lack of truly valuable messages that communicate how a firm can help a shareholder

To date, things have just been repackaged products that have a different moniker or a slightly different structure. For instance, we see many "Income Funds" marketed to Boomers which are really just high yield funds renamed. Different name, same stuff, (hopefully) a different market.

I think Boomers and their advisors are smarter than that and can see through it. To illustrate a truly differentiated product, experiment with not thinking of an investment vehicle as a product at all, but rather a service. A good example is American Express One, a new card that puts 1% of your purchases in a high-yield savings account. A couple notes:

- One is geared toward the Gen X and Y. AMEX is losing market share in these segments to the bank/debit card business and competing lower cost credit cards.

- Cash rebate credit cards have been around forever, but placing the money in a savings account saves the cardholder to take the money and transfer it to the right account, and then start saving ... a service. The service will let them compete with the bank value proposition.

- The product aims to statisfy the paradoxical tension between spending and saving, a trait Gen X and Y'ers are starting to share with their Boomer counterparts as they are maturing in the workforce (and paying their own bills!)

- One TV ad show a young, stylish African-American mother of twins shopping and implicitly saving for the well being of her children. Another online ad shows this:

While not a Boomer product, we can learn a couple things from this example. Create products that are services and create marketing that show how those services can make your customers' lives better.

A firm can spend money on Paul McCartney and show pictures of 50 year old surfers, but most Boomers can leave most asking, "So what?" or "Why does it matter to me?"

Furthermore, why do we stop at generating cash in income vehicles? Aren't these the same Boomers who want to travel and see Thailand, fund their grandchildren's 529 plans, put money aside for their own healthcare, care for their aging parents, while simultaneously thinking about how to transfer money to their kids in a tax efficient manner?

We have exhaustively researched the right asset allocation for the accumulation phase, but the asset manager's decumulation recommendation seems to be 100% cash. There is a need to create vehicles for sharehodlers and advisors to better create the asset deallocation portfolio. If we change our perception to answering service challenges, not product challenges, we may be on the way to developing true Boomer products.