Over the past 100 years the human population has done a very good job at staying alive. Not only are people living longer, but they are healthier and wealthier than ever before. How is the financial services industry responding to this? Especially when we live in a society that seems obsessed with developing and marketing products to a younger generation.
This was the key point at last week’s launch of FinTECH4Life – a conference uniquely focussed on the evolving needs of consumers in ageing economies. We convened a community of innovators from across the financial services sector (and beyond), policy-makers, regulators and thought leaders to explore what ageing means for the economy overall and financial services in particular.
Significant demographic shifts will be experienced across most countries in the world. Ageing economies, driven by increases in longevity and falling birth rates will translate into evolving customer profiles and needs. This was highlighted by Bradley Schurman, Co-founder of EconomyFour, during his opening keynote.
When you note that the fastest growing group of first-time mothers is between the ages of 40-49, patterns of demand will change. Exploring how the rest of a child-bearing couple’s life unfold and how that changes what and when they buy, save and invest are interesting patterns to discern. A key takeaway, however, is that the impact of ageing needs to be understood across all sectors of the economy.
Not only are people living longer, they are increasingly living healthier. This is reflected in changing work patterns – retirement no longer lands with a hard stop at 65. As people both live and work longer, the need for a different approach to financial services products needs to evolve accordingly.
Strict age limits on later in life lending in the mortgage market are both at odds with reality and, quite frankly, ageist, said Charlie Blagbrough, Policy Manager at the Building Societies Association. Ageism was a key theme running through all the panels and keynotes. It permeates the workplace, assumptions about what it is the older consumer wants/needs and the way that products and services are marketed at the Over 55’s.
Advertisers spend 500% more on millennials than all other age groups combined. This means that many businesses are missing what was recently defined by a government minister as the ‘opportunity of the century, the fast growing and economically powerful market of Over 55’s. This is the case even when the Over 55s are significant purchasers of a particular product, such as high-priced items like a Tesla automobile or an Apple smart phone.
That said, marketing products as something for ‘old people’ will not drive a winning strategy either. No one wants to buy a product that makes them feel ‘old’, commented Schurman.
We spend a lot of time talking about greater personalization, understanding behavior and reflecting consumer demand (Stage not Age). However, many companies are simply not doing a great job in reaching the Over 55s. There is a clear opportunity for startups and innovators to step in, as they have done elsewhere in financial services, and deliver better offerings. Even the entrepreneurs themselves may not fit into pre-conceived notions of what a startup founder looks and acts like. People over 55 are twice as likely to launch a high-growth startup as those under 35.
While many of us are living longer and healthier lives, those lives are not evenly distributed. Disparities in expected longevity and the financial health of the Over 55s were brought into focus across the day.
Gender and inequality, perhaps not unsurprisingly, are not ameliorated over the course of a longer life but are often exacerbated. Theo Lau, Founder of Unconventional Ventures, shed light on how the gender pay gap, the motherhood penalty ($16K a year in the US), the burden of unpaid work, caregiving responsibilities, impact a women’s financial position and opportunities throughout her life. Factoring in socioeconomic factors (for men and women) and the difference are even starker. Wealth has a clear impact on heath and lifespan and brings into sharp focus the impact of inequality.
As the sessions continued across the day, financial products were discussed in more detail and the conversation dipped regularly into the changing nature of retirement, how to ensure that pensions are funded and adequate to support longer lives and pay for care, if required. It seems that a significant portion of the population are facing a longer working life (which is not necessarily a negative if they remain in adequate health) but some worrying statistics emerged that pointed to shortfalls in pension savings. 48% of US near retirees have nothing saved in their retirement account.
The changing nature of work and the issues around multiple small pots was discussed and the importance of creating a habit of pension savings from early on. Innovators who presented on the day – such as PensionBee and AgeWage – are starting to tackle some of these issues but there is clearly still a mountain to climb.
Longer lives are to be celebrated but the progression of time often brings challenges as well. Adequate planning for the later stages of and the end of life is the exception rather than the rule and there is clearly a role for innovators and technology to create the products and platforms to support individuals and families.
Financial institutions have a crucial role to play in protecting vulnerable customers no matter the source – whether from ageing related illnesses or mental health issues. Dorothy Liviabella from Santander pointed to some important work done within the bank to understand vulnerability and drive frontline training and support. Charlotte Jackson, from the Money & Pensions Service highlighted the devastating and lifelong impact of pension scams and, again, a role for technology and innovation to help support people of all ages; the target age range for pension liberators (eg scammers) is 45-65 years but statistically more likely to be male (50-55).
Companies such as Kalgera, Birdie, Toucan and Reassura did a fantastic job of highlighting the ways in which innovative thinking and technology (such as leveraging Open Banking) can meet some of the challenges associated diminished capability. The investor panel really spoke to the size and scale of the opportunity for innovators in this space and I’m sure that the current and would be innovators in attendance took note. For those who get it right, the market they can potentially serve is enormous.
We are very grateful to the speakers and attendees who joined us for the launch of FinTECH4Life. There were some really illuminating observations made across the day – I’m still reeling from the fact that the Bank of Mom and Dad is in the top ten mortgage lenders in the UK – and we will take that all away with us whilst we plan for FinTECH4Life 2020, which has already been booked for the 26 March.