Ageing population and financial services

Speaker: Linda Woodall, Director of Life Insurance and Financial Advice
Event: Ageing Population Occasional Paper launch event, London
Delivered: 16 October 2017
Note: this is the speech as drafted and may differ from the delivered version

Highlights

• Not all older consumers are vulnerable. However, our work reveals that they are more likely to become so due to a life event, changes to their physical or mental health, or financial circumstances.
• Overall, we found risks that older consumers’ financial services needs are not being fully met, resulting in exclusion, poor customer outcomes and potential harm.
• Older consumers have diverse needs and preferences and there is no ‘one size fits all’ solution. But we found that there are some issues and access barriers that are more relevant for older consumers.
• There are opportunities for firms to consider the needs of the ageing population in: product and service design, customer support, and keeping this under review as the financial services landscape and wider customer base evolve.
• We also propose a number of specific ideas for firms, trade bodies and consumer groups to take forwards. 

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I’m delighted to welcome you today to our event on the Ageing Population and Financial Services. I’m really pleased to see representation across different financial sectors, trade and professional bodies, and consumer groups – this is a public policy challenge that needs to be addressed by multiple parties. Today’s conference provides an opportunity for us to reflect, consider and challenge ourselves to improve outcomes for our ageing population.

I want to start by briefly mentioning how our work on the ageing population fits in our wider strategic approach to consumers.

The FCA Mission[2] was published in April and provided a framework for the strategic choices we make. Our Mission consultation explored many important topics, including our specific role when it comes to consumers: what do we see as our responsibility to vulnerable consumers? Should we prioritise certain consumers? If so, why? What is our role in relation to social policy?

These questions are all particularly interesting in this context – and have no easy answers. Over the coming months, we will publish a series of documents that explore these topics in greater depth, and set out our initial thinking and views.

The first in this series is the Occasional Paper that we published last month on the ageing population – and that’s what I’d like to explore with you today.

In the next week, we will also publish our 2017 Financial Lives Survey, a substantial new source of data to help better us – and firms – better understand consumers, and which we used to inform our ageing population work. 

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. 

It’s well established that the UK population is getting older, and we are living longer than ever before.

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. 

there’s a risk that older consumers’ needs aren’t being fully met

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

I hope this is helpful in providing with an overview of our work. We’ll be exploring the particular findings and focus areas throughout today, so there’ll be an opportunity to consider what our findings mean for your businesses and ongoing strategies. In particular, you’ll hear about our ageing mind research and its implications for making decisions in later life, as well as the specific case studies we’ve looked into.   

Responding to the changing demographic is a public policy challenge that requires action from multiple parties to address over time.  

Thank you to everyone for coming today, and taking part – particularly to our speakers, host and of course the Ageing Population project team. 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’.

Many of you will have noticed that Andrew Bailey referenced ageing population issues in his annual Mansion House speech, underlying the importance of the subject to firm conduct – and demonstrating our ongoing commitment to this topic. We will continue to pay close attention to issues that affect older customers, using our sector views and strategies to tackle harm and maintaining ongoing dialogue with firms, trade and professional bodies, and consumer groups. 

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. 

We encourage you to take forward the challenge, and implement solutions that deliver better outcomes for older consumers. Meeting that challenge will be good for consumers, for wider society and actually good for businesses too.