On Tuesday, a US bankruptcy judge entered an agreement with the Pension Benefit Guaranty Corp. to terminate employee retirement accounts for United Airlines. If this agreement goes through, it is likely to spread throughout the airline industry...given the competitive advantage that United would gain versus other airlines. The reversal of fortunes for the airlines since 9/11 has been stunning. In 2000, airline pensions had a collective POSITIVE balance of $3 billion. At the end of 2004, there was a NEGATIVE balance of $31 billion.
This event must be sending shuddering reverberations throughout the US pension system, which is underfunded by $450 billion. Certain industries, e.g. the big US auto makers, might be especially vulnerable as they face a continued market share slide to the Japanese manufacturers. GM's pension obligations alone are $89 billion.
Sadly, this circumstance may present long-term opportunities for advisors who position themselves as resources to the employees of the affected industries. Anecdotal evidence suggests that employees in the companies most susceptible are looking at their exit strategies...from their industry altogether. The most obvious opportunity for financial advisors comes from assisting these employees with retirement plan rollover decisions.
When an employee leaves a company, they usually make a decision as to what to do with their retirement plan assets within a six-month window...i.e. 3 months before, and 3 months after they leave. Since the sales cycle for decisions like this can easily extend to 6 months and beyond, the advisor should build their connections to the employee well before the decision to depart.
Regarding the airline industry, there are a number of different employee constituencies...each represented by their own union, e.g. pilots, flight attendants, machinists, service workers, etc. Of course, in the case of airline executives, there is no union representation. For the advisor who is interested in learning some of the hot-button issues of the airline employees, one of the best sources is the union website. Below, I have listed some of the principal unions involved in the industry:
- Assn. of Flight Attendants, www.afanet.org
- Professional Flight Attendants Assn., www.pfaa.com
- Assn. of Professional Flight Attendants, www.apfa.org
- Delta Flight Attendants, www.delta.org
- AirLine Pilots Assn.,www.alpa.org
- Int'l Machinists and Aerospace Workers, www.iamaw.org
Rather than embarking upon a mass wholesale campaign, advisors should begin to make connections within these groups one-on-one...starting with someone that you know, and spreading out from there. Otherwise, you will give the appearance of "ambulance-chasing"...not a desirable positioning image. Referrals are always the more effective route.
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