By 2050, a quarter of the UK’s population will be over 65 and for the regulator, ensuring that older people are well served by products, and can readily access appropriate advice, is a key focus.
In a speech at London’s Mansion House last December, Andrew Bailey, chief executive of the Financial Conduct Authority, said older people were one of the most “powerful forces” impacting on the financial services industry.
He said there were major challenges faced, including how to ensure there was a sufficient pension saving and that people were guided into making “increasingly complex financial decisions later in life.”
Meanwhile in September, the FCA published one its Occasional Papers, which are designed to stimulate discussion, and it called for a joined-up approach, saying the government along with providers, advisers and charities among others should share knowledge to ensure there would be sufficient products and suitable guidance in place.
But it should also be noted that the ‘grey’ pound accounts for almost 50% of consumer spending in the UK and older customers are a huge marketplace, presenting opportunities.
Alongside this are vulnerability issues and this is why older customers and ensuring compliance should be an important consideration for risk managers.
Just some of the areas to cover include:
- Knowing the client base is essential – in order to identify those who require additional service levels
- Ensuring that there is sufficient resource – the FCA has pointed out that some older people are unable to use technology effectively
- Staff must have sufficient knowledge, whether this is understanding power of attorney for example, and also be able to spot the signs of financial abuse
Call for innovation
But in addition to warning on potential harm that can come to customers if there are insufficient safeguards, the FCA has also pointed out it wants to see more innovation.
This means more product development such as retirement interest-only mortgages. These would provide an alternative to equity release and while they are not allowed under current rules, the regulator is looking at introducing changes that would allow a new market to develop.
This is seen as necessary as between now and 2032, some 40,000 interest-only mortgages will be maturing annually and many borrowers may have no means to repay them.
Equity release has been criticised for being too costly and is also unsuitable for those who do not own their homes outright. These new mortgages would allow up to 60% of the value of a home to be borrowed and the loan is then repaid on a specified life event, such as the customer’s death or move into residential care.
Beyond this, the retail banking sector has also been told to make sure they keep a watchful eye on their older customers and that they do not discriminate in terms of access – notably, a number of banks have not increased their lending age limits.
A partnership approach?
It could also make sense for financial services providers to form partnerships with other specialist advisers so that older customers who need particular help can be effectively signposted.
So this could include travel insurance providers that target older people and can cover pre-existing conditions or with pensions advisers who can ensure older people do not fall prey to fraudsters. Equally, through access to investment advice that is tailored to older people, with clear information on offer.
‘Older and wiser’ can apply to some financial services customers, but certainly not all and particularly not beyond the age of 75. The requirements of those who may be more vulnerable is set to be revisited in the next few years by the regulator, and it wants to see the financial services sector as being up to the task – there is no time to waste in putting the right procedures in place