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Wednesday, February 24, 2016

UK Financial Services tries to understand the needs of older consumers

Great to see the Financial Services Industry is trying to understand the impact of population ageing.

The Financial Conduct Authority (FCA) is an organisation, funded by the financial services industry. It is accountable to the UK Parliament. It’s role in life is to protect consumers, financial markets and to promote competition.

The FCA has just released a discussion paper that is a collection of think pieces that is intended to provoke discussion and debate about how financial services work for older consumers.

The FCA wants to ensure that older consumers have access to products and services that are well-governed and deliver value.

Quoting from the paper:

We will continue to work with others to identify the challenges facing older consumers now and in the future.
We value external perspectives and engagement, and I would encourage you to contact our Ageing Population team if there are specific areas where you believe change is needed. We want to create a regulatory environment that encourages good market outcomes, and we cannot do this without insight from experts from across the spectrum.

I have had a read through the document. It is thorough and covers a wide range of topics (maybe too wide).

The document deserves a considered response and I will do this in the coming weeks but I thought it was worthwhile making a note of my initial thoughts.

The paper could have been made more focused (and shorter) by concentrating on the mega issues that impact financial services and older people. To be honest, these are well known and really don’t require much more research. How they are addressed is a different matter.

So here are the top five things I think the FCA needs to  address.

1. Older people don’t trust financial services companies. That could be said about the all ages but it is the older customer who has had more dealings (and disappointments) with the finance industry. Until people trust you they are not going to listen to you. Somehow, I doubt if the FCA needs me to tell them that!

2. Older people are woefully ignorant of financial service products. Yep, I am generalizing but most older people are utterly baffled by the costs and complexity of products. A lot of people think the industry intentionally does this to make it harder to be critical of product performance. So make the products easier to understand.

3. Most older Brits have most, if not all their wealth tied up in their property. Most Brits are woefully ill-prepared (financially) to fund their post-work lifestyle. This screams out that we need more and better and trustworthy forms of equity release. It is the no-brainer product requirement that is so far not being met. So FCA, that is something you need to address. Yes, products exist but they are primitive.

4. Financial Services companies, like most large organisations, are formed from multiple silos. If the industry is serious about adapting then it needs to imbed change throughout the organisation. The default is that one or two silos will attempt to change leaving the rest to continue as before. Change needs to take place throughout organisations to make them fit for purpose in a world of older people.  
5. Finally, there is hardly any mention in the document about how the industry is going to adapt to the physiological changes of older customers. That amazes me. The one thing that you can be certain of is that all the touchpoints between financial service companies and their customer will need to at least be evaluated and probably adapted for their state of age-friendliness. This covers everything from the design of physical assets (bank branches) through to digital assets through to the way staff are trained. This is something where we can help with the AF Tool.

I congratulate the FCA on this venture and hope it takes these points seriously. I will monitor how things develop. Dick Stroud 

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