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BNY Mellon forms retirement investments group

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Tuesday, Aug. 12, 2014, 12:01 a.m.
 

Bank of New York Mellon is moving to capture a wave of retiring baby boomers whose wealth could fall short of what they need to live.

The bank on Monday said it started a retirement and strategic solutions group and appointed Michael Gordon, specialist in “nontraditional” investments, to lead it.

The focus on retirees reflects a broader trend in financial services, said Marty Mosby, director of bank and equity strategies for Vining Sparks. Retirees in the United States are facing an estimated $6 trillion gap between the wealth they have accumulated and what they will need in retirement.

And competition for those investors is heating up among trust banks such as BNY Mellon and Northern Trust.

“Over the next decade, this demographic trend should become one of the dominant strategic trends for financial services companies,” Mosby wrote in an email. “Those that are positioned to participate in this increased demand should outperform while those that miss out could struggle.”

In less than three years, more than half of American individuals' assets will be in retirement transition or retirement distribution, BNY Mellon said.

The bank will combine expertise in retirement and insurance investments, and part of its strategy will look to nontraditional investments, such as reverse mortgages, for households that are behind the curve on what they need to retire, said Kim Mustin, BNY Mellon Investment Management's head of North American distribution.

“I think there's an enormous opportunity to help individuals right on the cusp of retirement, to make sure they enjoy the retirement that they've been planning for a long time,” Mustin said.

BNY Mellon, the world's eighth-largest asset manager, handles about $1.6 trillion in investments for institutions and wealthy individuals.

It is too soon to say what alternative investments might be offered, Mustin said, but Gordon specialized the reverse mortgage market for BNY Mellon Investment Management.

A reverse mortgage allows a homeowner to borrow money against the value of a home while still living there. No repayment of the mortgage is required until the borrower dies or the home is sold. Banking regulators are watching closely amid concern that reverse mortgages come with expensive fees, high rates and can saddle heirs with financial burdens to pay back the mortgage or risk foreclosure.

Reverse mortgages aren't for everyone but could be part of a package of options for retirees who need income, said BNY spokesman Mike Dunn. “We want to use it as one tool among many,” he said.

Chris Fleisher is a Trib Total Media staff writer. He can be reached at 412-320-7854 or cfleisher@tribweb.com.

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