Ageing population and financial services

The Financial Condusct Authority (FCA) published a paper on the aging popualtion. In her speech, Linda Woodall, Director of Life Insurance and Financial Advice, talks about the findings from the paper, like the risk that older consumers’ needs aren’t being fully met. And that there opportunities for firms to apply the findings as part of their own business strategies and models going forward.


What we did – and why
So – why did we choose to study this group of consumers? It’s well established that the UK population is getting older, and we are living longer than ever before.  I want to highlight a few statistics that illustrate this: one in three babies born today can expect to celebrate their 100th birthday. By 2050, one in four people will be aged over 65. And those aged over 65 already outnumber those under 18. And if this is true for the UK population as a whole, it means it’s true for the customer bases of financial services firms. So it’s one of the key social and environmental factors that will shape financial services both now and in the future.
Consider the people you are close to in your life. Almost all of you know an older person who might be finding that certain aspects of their lives have become just a little more complicated with age – including the use of financial services and products. Be it a parent, neighbour, friend – or even some of us here today! What’s been striking as we’ve worked on this project over the past 18 months is how much this topic resonates with people on a personal, as well as on a professional level. I believe we can harness that personal connection and translate it into understanding and action by both industry and consumer groups, and in some circumstances, government.
It’s important to flag from the outset that the purpose of this project wasn’t to catch firms out or test compliance with our rules. Instead, we considered where there may be harm arising – including financial exclusion – and challenged ourselves to work with industry and others to make things better.
What we found
We found that there’s a risk that older consumers’ needs aren’t being fully met – which could mean exclusion, poor customer outcomes, and potential harm.
We found that there’s scope for firms to do more to support older consumers – from how products are designed, to the way consumers engage with their financial products and services and how they are supported when they do so. And we found that while older consumers aren’t necessarily vulnerable, they are more likely than other groups to become vulnerable. This could be through the loss of a loved one, changes to physical or mental health that affect day-to-day activity, or limited provisions for retirement. Each of these factors can reduce financial resilience, change financial circumstances, or cause other challenges for the consumer. In response, we’ve set out issues and ideas for industry and others to consider.
For firms in particular, there is an opportunity to think about how they can apply these findings as part of their own business strategies and models going forward. In the longer term, we hope this will encourage sustainable change – through firm, regulator, and consumer action.
What can firms do?
At a high level, our ideas can be grouped under three headings: design, support, and adapt.
Product and service design
First, design. All too often, products and services appear designed for an ‘average’ consumer – who may not actually exist. Or policies and processes are designed around corporate needs, rather than the customer’s. A number of our other pieces of work indicate that products are services are not always designed in a way that best meets the needs of the wide range of consumers that make up firms’ wider target markets – and this includes older customers. So firms could think about how they can take older customers’ needs into account when developing products, services and distribution channels, and involve older consumers in testing and product design.
Customer support
The second area is customer support. We’re asking firms to think about how they support older consumers, especially as their needs change over time. In particular – are there new products they could develop to fill gaps in the market? How could firms help customers recognise when they’re having difficulties, and encourage them to ask for help? A firm might be a key port of call when someone is contemplating retirement, suffering a bereavement, or working out how to fund residential care. What role do firms play in helping individuals make sense of their financial situation, explaining the technicalities, and helping them feel more in control of their finances?
Review and adapt strategies
Lastly, we recognise the landscape is ever shifting. This cannot be regarded as a point in time challenge and solutions will need to be reviewed and adapted. It requires continual, not one-off, short-term solutions, or ‘box-ticking’ approaches which do not move with the times. This is true both for firms and for us as the regulator.
Conclusion
From the outset, the aim of this project was to work collaboratively with others to help bring about positive change. And we’ve been encouraged by the positive and innovative approach many firms are taking to addressing the challenges and opportunities that come with an ageing population. This project wouldn’t have been possible without the firms, industry and consumer groups and not for profit bodies who met with us over the course of the last 18 months and who provided us with valuable insights and examples of how financial services could better support and meet the needs of older consumers.
It also builds on our previous work on vulnerable customers. In response, industry has already been taking steps to reduce access barriers and provide appropriate support for consumers. But, as I said before, this isn’t a point in time challenge. Ongoing work is required to explore issues and address sources of potential and actual harm.
Our response to demographic change will require periodic, strategic review over time, and extends beyond the needs of older consumers. As I mentioned, we’ll soon be publishing our 2017 Financial Lives Survey, and later this year we will publish our wider Approach to Consumers summarising a number of important factors which will affect how we exercise judgement and ‘regulate for the future’.
We anticipate further review in three to five years of how the financial services industry is adapting to meet the needs of older consumers. This will allow time for firms to respond to the issues discussed in our paper, and for us to consider if further rules are needed beyond the core requirement to Treat Customers Fairly.
Responding to the changing demographic is a public policy challenge that requires action from multiple parties to address over time.  By bringing together our commissioned research, case studies and examples of best practice, we hope that the package of materials under the Ageing Population project will drive further positive innovation in the interests of older consumers.
Source: https://www.fca.org.uk