There are big changes ahead in investment products and channels, predicted Tiburon Strategic Advisors Managing Principal Charles “Chip” Roame on Wednesday at the Tiburon CEO Summit in New York City. Low-cost indexed securities will account for 25 percent of all investable assets in the next three to five years, up from 6 to 7 percent now, he said. Hedge funds will claim another 25 percent of the share, up from 9 to 10 percent currently, he added. Look for big growth in guaranteed income products, too. Whether annuities will garner a big share of that increase is a coin toss, Roame said. “Annuities have been the product about to win three or four times over the last 20 years, and they’ve never won,” he said. On the other hand, if the federal government mandates some type of annuity product for retirement, their growth could be “exponential,” Roame said. That door was opened when President Obama’s Middle Class Task Force issued a report in February called for the promotion of guaranteed lifetime income products.
Roame also said that investors may hold financial advisors partly responsible for the recent financial collapse, even if they had nothing to do with it. Investor ire simply isn’t as clearly focused as many people in the financial advisory world might suspect, he said. “I think it’s easy for a group in this room to say, ‘Oh yeah, Bernie Madoff’s a bad guy, or maybe Goldman Sachs is a bad firm, but WE’RE not! We’re the good guys!’ I don’t think the average consumer can separate those two,” Roame said. “The industry’s back, firms are making money again, but I don’t think every consumer’s hunky-dory right now.”
Roame said about $11.5 trillion in household net worth was lost in 2008 among 120 million households; only about $3 trillion was regained in the stock run-up of 2009. Consumers haven’t seen the value of their real estate restored, and many got out of the stock market after the crash and stayed out last year, missing the equities recovery. “We’re down $8 (trillion) still, which means we got a lot fewer affluent households, however you define them,” he said. “The retirement income crisis is significantly bigger now.”