Retirement, redefined: when you think you know everything about marketing to seniors, there is...

When I was little, every Tuesday afternoon I would accompany my grandmother to the bank--one of my favorite places to go. We would sit down in the lobby of Dime Savings, sip tea and eat cookies while Ms. Jo (short for Johannsen) would conduct my grandmother's banking business. Ms. Jo made sure

After several of these visits, I thought that Ms. Jo would get tired of doing this. So being the inquisitive child, I asked my grandma why would Ms. Jo take time out of her day to do this. My grandma said that it is part of her job because of the type of account that she has. She was in the Golden Club. Her face beamed as she said this.

"Gold Clubs" and programs like it have more to offer than just tea and biscuits.

Today the term "marketing to seniors"--and its many pseudonyms like "mature market," "post-retirement market," "55+ market," "retirement inflexion point," and others--is more than just a coined phrase. It is a variety of programs and products that not only appeal to older customers but also help retain a valuable resource, relationship banking.

Developing the relationship

According to a survey by Administration on Aging of the U.S. Department of Health and Human Service entitled A Profile of Older Americans. 2001, there are 35 million citizens over the age of 65 living in the U.S., accounting for 12.4% of the population in the year 2000. Since 1900, the number of citizens in this segment has more than tripled with an additional 17.9 years added to their life spans.

The largest portion of this market will come from the baby boomer generation (people born between 1942-1964). According to a white paper entitled New Mature Marker, by FISI Madison Financial, a baby boomer turns 50 every eight seconds. This generation is also the wealthiest, accounting for a large portion of the total $1 trillion dollars that is generated by the mature market.

The mature market is considered the nation's big spenders in every category and spends additional $300 billion a year on new home purchases or improvements, travel, grandkids, and living their lives to the fullest. A small percentage invests in the stock market.

With this rising rate of the senior population, the opportunities for growth go beyond leaps and bounds. More retirees will be looking for the best financial information--specialized for them. To compete, banks will need to know what the needs of the mature customer are.

According to a research done by The Diversified Services Group, Inc., Wayne, Pa., many 401(k)ers plan to pull out their money near the time of or at retirement. Many people lack adequate financial counseling prior to this stage. Many believe that such information should be accessible through their workplace.

These thoughts are echoed in FISI-Madison's white paper. It states that there is an overall lack of information about financial products that would help in management of finances and nest eggs. Many pine-retirees put off making financial decisions because of the vast array of financial products available with no direction of which way to go. Both employees and employers agree that there should be more "product-neutral" advice available.

In July, President Bush signed into law the Corporate Accountability bill that included two provisions from the Pension Security Act, passed by the House in April. The Pension Security Act will give workers new protections and freedoms to safeguard retirement savings, enhance the quality of investment advice, and insist on greater accountability from company insiders. The Retirement Security Advice Act, passed last November by the House, will allow employees access to professional investment advice for their 401(k) plans. Both will be voted on in the Senate this fall.

"There is a big opportunity for banks, given the current economic climate," says Dan Tarantin, president and CEO, FISI-Madison Financial. "Banks can recover the business that was lost in the late 1990s." Banks have the opportunity to become the "product-neutral" solution that consumers seek. Robert Grieb, founder of Diversified Services, suggested in the research report, The Retirement Inflexion Point--Advantage, "Banks", that enhancing the customer relationship is the key.

First, banks can become "product-neutral" by acting as brokers offering multiple product lines. In that position, banks can offer the best financial services and advice available--offering the possibility of a broader client base. The addition of qualified investment representatives to existing personnel would help make this happen.

In the days of Ms. Jo, she provided basic banking services but she knew what accounts would work with which client. When it comes to the customer and her investment, a rep needs to be able to be flexible as well as knowledgeable. The rep should be committed to customers by offering them the best product for their needs while giving each account a personal touch. This will result in a more customer-focused orientation than product-driven one, the report states.

Second, banks can bring in nonfinancial products and services that are appropriate for their market, says the Diverisified Services report. Much like the tea and biscuits of the days gone by, institutions can add cultural events and travel as incentives. The addition of these programs brings a different and very effective type of advertising--word of mouth. No matter what the person's age, people like to talk. They like to talk about what is going on in their lives--what their kids and grandkids are up to. Your institution can be part of that conversation, states the report.

Speaking of advertising, that brings us to the report's third point: a bank's market position and customer information which can help identify and reach a target audience.

Banks involvement in the mature market can be achieved on multiple levels, says the report. For example, financial institutions can leverage their commercial relationships to gain access to the workplace to provide information, seminars, and solutions that will benefit retirees, employers, and employees. Partnerships with outside firms will help your bank to become a focal point for advice and investments--a "total solution."

Diverse tastes and attitudes

With more retirees travelling the open road and skies, it seems that their financial needs are likely to change. Today's mature market is more active than generations past. They're developing diverse tastes, interests and concerns that breaks the mold of the "traditional" retiree. Retirees are redefining themselves by going back to school, starting new careers, meeting new people, and getting remarried.

Heritage Clubs International, Inc. offers an answer to these needs. This program, which started as The Heritage Club at First Citizens National Bank of Charles City, Iowa in 1980, packages financial and educational information with social services. From it's beginning, the program has grown to include 235 banks in 32 states with a membership of more than 250,000.

"The program grew out of our desire to provide special services for the very best retail customers in our bank," states George Aker, president of Heritage Clubs International, Inc. "As bankers, we have a strong desire to build core deposits and cross-sell our many banking services. The members are accountable for $230 million of our assets. That is 46% of our [total] deposits. That is an average of $38,000 per account and 5.7 banking services used [per club member]," says Aker.

The program sets up free financial services, group social activities, free monthly movie nights, travel (the program's drawing point), educational programs, and health/wellness programs for its members.

For entry in the club, applicants must be "55 years or better" with balances in transaction accounts of $1,500 or in CDs of $15,000.

Another "mature market" solution is the Horizons Club offered by First State Community Bank, Farmington, Mo. introduced in 1986. The loyalty club offers discounts on a wide range of products like safe deposit boxes and notary services. The social aspect of the club includes in-town events, day-trips and attractive group rates on extended travel throughout the U.S. and abroad. For entry into the club you must be 55 years old, maintain a minimum of $5,000 in a combination of deposit accounts, and open and maintain a checking account.

FISI Madison has long offered marketing programs for the mature market. CEO Dan Tarantin says, there is growing interest in healthcare features. FISI-Madison's special program for healthcare called, "Wellness Extras," provides discounts on vision and hearing services, pharmacies, nurse hotline, and medical information ID tags. "We also offer in this program discounts on mail order pharmacies," says Todd Smith, director of communications for FISI-Madison.

To determine whether or not the senior market is for your institution, ask yourself the following questions: Do you want to increase your deposits? Are you willing to spend money to retrain or acquire new employees and products? Is the investment worth it?

The overall answer for many banks is "yes." Older consumers will receive the most up-to-date information on investments that your institution can offer. A senior program can also serve as a community outreach by offering a diverse collection of activities. The best approach is the all-encompassing strategy that employs both personal interaction in the branches as well as internet access, states Tarantin.

The mature market is looking for products and institutions they can trust--banks provide that, claims Tarantin.

By the way, Ms. Jo, now Mrs. Jones, has moved up to branch manager and is a golden club member herself.