Supply & Demand: The Economic Past Shapes the Financial Services Future

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This time, things are different.

As often as investors have contemplated that possibility over the years, probably a like number of times they have been cautioned to forgo such thinking. Be it interest rates, labor markets, money supplies, housing starts, asset prices — cycles rule. Neither good times nor bad lasts forever.

Despite that, economic turbulence in recent years gives rise to feelings of worry and uncertainty. For consumers as well as providers of financial products and services, the environment continues to pose new challenges. And likewise navigating this altered landscape are financial product distributors.

The future isn't as clear as it once seemed. As what may prove to be a "new normal" unfolds, consumer perceptions of what to buy and provider attitudes toward what to sell continue to change. Let's consider both sides of this financial product supply and demand chain.

Supply Side Solutions
From the insurer standpoint, companies were forced to take a hard look at their offerings in the last few years. Some product solutions suffered from diminished appeal in light of the changed environment, and were pulled from the market. Others were altered based on revamped profitability forecasts to insure they remained viable. All are decisions keenly important to issuers. Moreover, these moves present challenging changes of course for producers accustomed to navigating products they know… understand… and are comfortable presenting.

As certain products are altered or eliminated, producers can lose access to their most familiar solutions and may be hard-pressed to supplement them in the portfolios they promote. They may be forced to scramble to find new products to present or different companies to represent. A climate of ongoing change raises the question: Will only the strongest and most highly capitalized of companies be able to offer full slate of offerings in future? Only time will tell. Producers will without question be affected significantly as they work to rebuild their selling strategies.

Demand Side Dynamics
On the other hand, consumers are coming to advisors with a different set of retirement planning dynamics. They may be looking for more guaranteed products. Their risk orientation may have shifted dramatically in a short time. And with it their product affinity may have changed as well. Producers accustomed to presenting more aggressive investment alternatives to their client base find themselves before a group with less appetite for risk. Thus, advisors formerly ready to talk about strategies such as variable annuities and mutual funds, now may face reorienting themselves to build solutions with fixed annuities and guaranteed benefits.

In addition, clients may be seeking new product solutions that are simpler and more transparent. Also, they may be taking more time with their buying decision, investigating more options and asking more questions about features, benefits, costs and companies. It all comes down to continued evolution in the advisor/client relationship.

The New Supply and Demand Opportunity
Amid a world where investor mentality has swung from buy-and-hold to sell-and-hide, the financial crisis has created a new business paradigm for the middleman in the financial services sales process. Clients demanding different ideas are on one side. Companies supplying a changing product mix are on the other. Advisors, caught in the middle, must respond to both sides of the retirement security relationship. When you're still struggling to catch your balance, it's difficult to know which direction to seek. But this cascading effect of supply and demand rightly deserves to be viewed as a golden opportunity on both ends of the sales spectrum. It's a producer's chance to reconnect with clients, better understand their needs and respond with innovative solutions. In short, it's an opportunity to revisit financial plans and reaffirm relationships for the future. Such a change stands to benefit us all.