BABY BOOMER INVESTMENT PORTFOLIO

As this year comes to an end, I thought it would be a great
time to take a longer-term perspective of things, and focus
on one of my favorite long-term trends: demographics. In
this case, I’m going to focus on my fellow “baby boomers,”
and show you how to develop an investment portfolio to
benefit from this historic, demographic shift.
Now that these baby boomers are becoming card-carrying
senior citizens—I’m one too, as I have my very own AARP
(American Association of Retired Persons) card—they’ll be
unlike any previous group of senior citizens.

First, this group isn’t going to stand for gray hair and wrinkles.
Instead of “working” in the traditional workplace, these
senior citizens will focus on working at playing. And finally,
they’re going to be around a whole lot longer than
previous demographic waves of senior citizens. Thus,
unlike earlier senior citizen groups, not only will these baby
boomer seniors focus on spending, they’ll focus on saving
and investing as well. A confluence of three trends will
distinguish this baby boomer generation as they become
senior citizens.

THE TRAVEL & ENTERTAINMENT TREND
One thing’s for certain: This group of baby boomer senior
citizens will turn the travel and entertainment sector
upside down. They’ve wanted to be entertained
throughout their lives. Now, along with entertainment,
they’ll travel more than ever before.

Three factors are likely to cause a boom in travel. First is
the mobility of families today. Baby boomers’ parents
seldom settled far from their birthplace. Family reunions
and visits to kin were relatively easy—all they had to do
was drive across town, and they could probably see
everyone. That’s not the case anymore. Baby boomers
taught their children to be independent and to follow their
dreams, no matter where they led them. Thus, the United
States now has a group of senior citizens whose children
and grandchildren are spread out all across the country,
and sometimes the globe. It’s a whole lot easier for the
retired grandparents to travel to see the family than it is
for the family to come to them. This could very well be the
first generation of “grannies on the go.” Unlike their
parents, who expected all family visits to occur back at
their house, these seniors will be happy to hit the road,
stopping to see family and extended family.
Second, the globalization of the world’s economies has
opened up new avenues to explore around the world. As
capitalism and tourism are embraced, these senior citizens
will want to see it all, and experience it all, in their lifetime.
Instead of the travel-torn, weary-eyed grandparent getting
off the Greyhound bus after a long trip, these senior
citizens are likely to fly a new airline: ‘Grandparents “R” Us,’
catering exclusively to senior citizens.
Third, these baby boomer seniors are affluent, and thus
have disposable income for both travel and entertainment.
If there’s ever a generation that can pay to have a vacation
weekend “on the moon,” this generation is it. After all, they
grew up living the dream that President John F. Kennedy
planted in their minds about space travel. This generation
will not stand to let any other generation beat it on trips to
outer space.  The most fascinating aspect of the baby boomers may be their desire for entertainment. Perhaps after earning so
much money, they want to enjoy life as well. To count the
baby boomers as their customers, businesses must transform every product and service into an entertainment experience.

THE HEALTH & FITNESS TREND
One thing that money cannot buy is good health. Make no
mistake about it, baby boomers did not lead a healthy life
so that they could sit around playing checkers when they
retire. They intend to continue to be extremely active, and
the only way that can happen is to keep up their health
focus.

This isn’t a passing fad. Baby boomer senior citizens will
force every senior citizen center to have state-of-theart
workout equipment and health club facilities. They
also know that what they eat is the key to staying healthy.
These baby boomer seniors will continue to eat right and
eat healthy, changing the focus of the food sector forever.

THE FINANCIAL ADVICE TREND
Historically, when people reached the age of 65, they
weren’t too worried about investing and saving; they were
more worried about making sure that their last will and
testament was in order—but not anymore. When these
baby boomers reach the young age of 65, their life
expectancy is now 86. In other words, they have 21 more
years to live, so they’d better continue to save and invest.

The only problem is that these seniors want to travel and
be entertained and not worry about every nuance of the
market. Enter the stockbroker turned financial advisor—
back from the possible extinction list, and possibly one of
the best sectors in the coming decades. When you’re busy
ruling the world, you convince yourself that the future will
always look like the past. That’s why the dinosaurs never
saw it coming! Stockbrokers, however, are not dinosaurs.
They did see it coming, and they evolved from a
transaction-oriented career to value-added financial
advice. The baby boomer seniors will have more financial
and market information at their fingertips than any
generation ever. The only problem is that they don’t
have the time to process it. Look for these senior citizens
to turn to their financial wellbeing over to a financial
advisor. As a result, the brokerage industry will
witness an unbelievable growth spurt.

In addition, this baby-boom senior-citizen generation is the
first generation in the history of the United States that will
accumulate more wealth than the generation that follows
it. The sheer size of the baby-boom generation means
there will be more people with more money to transfer.
Looked at another way, “transfer of wealth” is more
important to this generation than to any other generation
in history. To transfer their wealth in the most efficient and
effective way possible, they’ll need the help of a financial
advisor. The biggest legacy of the baby boomers may be
that they’ll make the stockbroker turned financial advisor
into one of the most important and respected sectors in
the world—certainly a rightful place for professionals who
are caring for the financial health of millions of people.
Another reason for the financial advisor boom is the
complexity in the baby boomers’ lives, especially from a
financial investment perspective. Every minute of every
single day, somewhere, some market is open and
something is happening that will affect their investments.
They need to simplify a life that gets more and more
complex.

Think about it. When these baby boomers grew up, the
choice of coffee was pretty simple: Do you want it black,
or do you use cream or sugar? Sanka was the only
decaffeinated coffee that was available, and there was no
sweetener substitute. Think of all the decisions a baby
boomer senior citizen will have to make to order a cup of
coffee at Starbucks today. Who knows, by the time they’re
through, they may have ordered a double decaf, grande
latte, expresso, double skim mocha with raspberry syrup
and non-fat whipped cream with a touch of nutmeg and
cinnamon followed by a dash of vanilla.
Then, the boomer goes to the greeting card store to pick
up a card for a friend and finds a maze of options. Is the
card for a “friend,” an “old friend,” a “good friend,” “best
friend,” “like family friend,” or a “used to be friend/friend
again friend?” Unable to reach a decision, the would-be
purchaser leaves the store empty handed—after all, it
would be rude to choose a “good friend” card for someone
who believed she was the sender’s “best friend.” These
baby boomer senior citizens are tired of life’s growing
complexity. I believe they want someone to order their
coffee, pick up their greeting cards, and most important,
take responsibility for their financial assets and financial
well-being for the rest of their lives.

BABY BOOMER PORTFOLIO
When thinking about what to invest in to benefit from this historic demographic shift, four industries come to mind.

First is the travel industry, as these boomers will most
certainly travel unlike any other generation before it.
Second is the health equipment and fitness industry, as these boomers intend to be the most active generation ever.
Third is the food industry that specializes on healthy food and healthy
choices.
Fourth, and finally, is the brokerage industry—
possibly the biggest winners of all—as these boomers look
to financial advisers in greater numbers than ever before.

Speaking of financial advisors, when you sit down with
your advisor, make sure that your investment portfolio has
some exposure to those areas that may benefit from this
historic shift of baby boomers’ wants and needs.

In closing, here’s one of my favorite baby boomer quotes
from Rosabeth Moss Kanter, a Professor at the Harvard
School of Business: “The boomers’ biggest impact will be
on eliminating the term ‘retirement’ and inventing a new
stage in life…the new career arc.”

The views expressed here are those of Dr. Bob Froehlich. Dr. Bob Froehlich’s views are not necessarily
those of The Hartford and should not be construed as investment advice. They are subject to change.
All economic and performance information is historical and does not indicate future results.

Dr. Bob Froehlich’s sources of information include Bank of Canada, The Bank of England, Bank of Japan,
Bloomberg News, Business Roundtable, China Investment Corporation, CIA. World Fact Book, CNBC,
Congressional Budget Office, Deutsche Bank, The European Monetary Union, Federal Reserve Board,
The Financial Times, Freddie Mac, FOX Business, Goldman Sachs, International Monetary Fund,
International Strategy & Investment, Journal of Commerce, Merrill Lynch, PIERS Global Intelligence
Solutions, Strategas Research, Thomson Reuters, Union Bank of Switzerland, U.S. Census Bureau, U.S.
Department of Commerce, U.S. Department of Labor, U.S. State Department, U.S. Treasury Department,
The Wall Street Journal, and The World Bank.
PAST ECONOMIC PERFORMANCE DOES NOT ENSURE FUTURE RESULTS.

“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries.
Distributed by Hartford Securities Distribution Company, Inc.
All information and representations herein are as of 12/10, unless otherwise noted.
P6170_122710 103555 12/10
To read Dr. Bob’s weekly commentaries, visit HartfordInvestor.com

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