Capital Markets Corporate

February 21, 2019

Wine, cheese and financial services – getting better with age?

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Wine and cheese set a high benchmark when it comes to ageing well. Within the culinary world, fruit cake, cordial chocolates and stinky tofu also warrant a mention for getting better with age. More broadly, so too do happiness, decision-making, empathy, story-telling and self-confidence.

But not financial services, it would seem. Buried among the myth-busting findings of our recent report on generational attitudes to the sector – Who’s caught the millennial bug? – were some worrying revelations about the experiences of older age groups. Compared to their younger counterparts, the ‘baby boomers’ in their mid-50s to mid-70s who took part in our research emerged as the:

  • most likely to say the impact of the 2007/8 financial crisis has made them less trusting of financial services companies
  • most likely to feel a lack of brand loyalty towards their bank, building society or insurance company
  • least likely to feel the communications they receive from financial services firms – from marketing and advertising to policy documents and annual statements – make them feel confident in their financial decisions.

This sense of generational disenfranchisement would be a cause for concern at the best of times. But with older consumers making up the UK’s fastest-growing demographic, it suggests the sector is still playing catchup with the needs of our ageing population.

Practice doesn’t make perfect

One of the interesting nuances to emerge from our findings was that the experience of learned or repeated behaviours – such as buying a home, changing mortgage provider or completing a tax return – left the baby boomers feeling noticeably more confident in these areas than either millennials or Generation Z.

In contrast, despite being older and notionally closer to retirement, their extra years of experience have provided baby boomers with little in the way of extra confidence about how best to save for retirement, choose pension funds or make investments. Uncertainty abounds and this is one area where it seems that practice doesn’t always make perfect.

It’s no surprise when you consider how many people in this age group – particularly those in their 50s and 60s – are increasingly living by different rules than their parents with the end of default retirement, the worldwide shift from defined benefit to defined contribution pensions and the onset of pension freedoms. Throw in a decade of economic uncertainty and low savings returns, and people arguably have every right to expect more of a helping hand from financial services in later life.

Winning trust and confidence

Communication has a vital part to play in meeting the challenge, and was a prominent theme among the actions arising from the Financial Conduct Authority’s Retirement Outcomes Review. The detail of its proposals on new investment pathways for savers include calls to action for better disclosures on fees and charges, investment risks and the benefit of seeking guidance from the long-awaited Single Financial Guidance Body.

Media headlines addressing older consumers and financial services – from the “toxic trend” of pension withdrawals to the latest car “insurance hike” – often paint a disproportionately negative picture of this demographic and their prospects. Vulnerability is often assumed by default, rather than being seen a potential issue with multiple contributing factors beyond age alone. With its endless reliance on stock images showing either sun-kissed or washed-out portrayals of retirement, the media can certainly get better at dealing with age.

Nevertheless, rejecting stereotypes doesn’t give financial services professionals an excuse to overlook the nuances of communicating effectively across the age spectrum. The regulator’s work on the ageing population gives a useful steer on how people often think, plan and act in later life – from the increasing challenge of adapting to unfamiliar tasks or distribution methods to the tendency to take an overly optimistic view of their needs while underestimating longevity and health risks.

Advice and guidance are a fundamental part of the solution, with advancing technology presenting new opportunities to improve the tools available to consumers, advisers and other third parties involved in the conversation.

Ultimately, whatever the channel and whoever the messenger is, effective communication is key. When financial services firms want to engage this demographic with appropriate care, it’s about much more than finding messages that are simply received – they must also be properly understood and prompt the necessary action to win the trust and confidence of consumers that their future is in good hands.

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