Financial Services Industry Shifts into High Gear: Sears Counts on Maturing Baby Boomers to Boost Its Growth in Asset Management

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MONTREUX, Switzerland -- Sears, Roebuck and Co. is counting on the maturation of the baby boom generation and changes in United States saving incentives to drive its financial services businesses to profitability, a key Sears strategist told bankers here Tuesday.

By concentrating on long-term personal financial relationships with consumers early in their adult lives, Sears expects to differentiate itself from competitors and eventually attract the post-World War II generation's accumulated wealth, Philip J. Purcell, president of the Dean Witter Financial Services Group, told the European Financial Management and Marketing Association's convention.

Mr. Purcell noted that the 74 million people born between 1946 and 1964 will cause the U.S. population in the peak earning ages of 35 to 64 to reach 104 million in the year 2000.

"The firm that financed his car, took the mortgage on his home, managed his assets and made them grow over the years -- that defines Sears' role," Mr. Purcell told 1,000 attendees at the international symposium here.

He also said that the economic and political climate, with U.S. inflation low and the President and Congress stressing reliance through savings and investments, favors an organization in pursuit of lasting financial relationships that begin early in the life cycle.

Putting it more graphically, Mr. Purcell said of the baby boomers, "Now many of them are called yuppies, or young urban professionals. Ultimately they will become guppies -- geriatric urban professionals.

"As yuppies gray their way into guppiehood, the numbers of the elderly will explode," he continued. "Their pension assets are currently under control of institutions which, for the most part, have managed their money poorly."

Enter Sears and its New York-based Dean Witter Financial Services Group, which Mr. Purcell, a low-key onetime McKinsey and Co. consultant, heads. It is the group responsible for the network of financial service outlets in 300 Sears stores across the U.S., and it is the one developing the combined credit/Financial services card that was announced last month.

"As wave after wave of people turn 65, much of the current $725 billion in pension fund assets will be rolled over to a variety of financial instruments chosen by the consumer. More likely than not, those funds will go to the financial services company that has had a longstanding relationship with the newly retired customer," Mr. Purcell said.

"It appears that this session of Congress will enact some restrictious on corporate, tax-sheltered savings plans, especially the 401-k [salary reduction] plans, which the Treasury Department wants to eliminate altogether.

"At the same time," he added," both the Treasury and key congressmen want to increase the amount that can be contributed to tax-free individual retirement accounts. Indeed there is considerable support for making IRAs the backbone of a retirement system based on individual savings. …