Corporate

Boomers, Gen X and Millennials….: does the market for financial services address their different needs?

Difference in the anticipated life chances of the different post war cohorts, referred to as the “Boomers”, “Gen X” and “Millennials” is garnering increasing amounts of attention from policy makers.

On 2 July the FCA set out to develop further its own thinking on this topic, hosting a conference on the issue of Intergenerational Differences. This follows the publication of the FCA’s May Discussion Paper on this topic.  The Discussion Paper helpfully illustrates some of the differences experienced by these groups and sets out a number of key issues and questions to be considered.

Christopher Woolard, the FCA’s Executive Director for Strategy & Competition noted in the foreward to the FCA’s discussion paper that:

“Baby Boomers, Generation X and Millennials lead very different lives, have different expectations and different resources. They will have different financial needs as a result. Financial services markets will need to adapt and innovate to meet them. This is not just a challenge for the financial sector. There is also a central role for public policy makers. Regulators, therefore, need to adapt.

……………………….We should test and challenge assumptions about what consumers need in the context of different intergenerational factors, to ensure our regulation adapts to the changing requirements of the different groups within and between generations.

Risks and Opportunities

Amongst the questions the FCA has posed are a number which should be a key concern for the wider asset and wealth management industries. These  illustrate both the risks and the opportunities presented by the current pattern of, seemingly increasing, divergence in the financial needs and expectations of different generations.

For example, it is clear that FCA will be looking critically in the future at how well the industry is serving the different needs of consumers of different age groups. FCA is seeking views on whether there is any market or firm behaviour that, when viewed through the lense of intergenerational differences, may cause harm to consumers.  Amongst the key questions posed by FCA are whether industry is:

    • failing to recognise varying needs of consumers from different age groups and as a consequence, of this: offering products which may be unsuitable to certain age groups; or
    • excluding, discriminating against, or failing to advance equal opportunity between certain age groups for no legitimate and objectively justifiable commercial reason (or where the reason is potentially legitimate but the approach is not proportionate) otherwise treating certain age groups unfairly.

Firms will be well advised to consider their approach to advice, sales and distribution to ensure that these factors are appropriately addressed.

Looking at future opportunities, the FCA has queried whether innovation in product design may be a way of meeting the changing needs across different age groups and has asked what it could do to encourage and enable positive innovation, including by addressing any FCA regulatory barriers or barriers to competition.

Firms wishing to comment should respond to the consultation paper by 1 August.

Karen Fountain

Partner at Brodies LLP
Karen is a partner at Brodies in the corporate team. She has over 20 years' experience of advising leading financial institutions, funds and intuitional and strategic investors across the globe with a broad range of matters.
Karen Fountain