Live Long & Prosper…?

In 1851 male life expectancy was 39.9; now it’s now over 81. People are living longer than ever before – albeit not always in good physical shape or mentally sound. Without a major scientific breakthrough it is very likely that many of us will face our ever prolonged twilight years struggling with life in general. This has very important consequences and the FCA has just published an ‘occasional paper’ entitled ‘Ageing Population and Financial Services’.

The FCA paper focuses on the ageing process and how it may impact a person’s ability to make financial decisions. It also discusses the challenges posed as levels of Dementia, Alzheimer’s Disease and other ailments increase, particularly in financial exclusion. Some say this is overly alarmist but most expert opinion is that the risks identified are set to grow in scale. It could be that a smaller working population will be faced with maintaining an ever growing retired sector potentially exerting massive demands on the NHS and other services. Long term care is an issue waiting in the wings to test all politicians and society.

The FCA appears keen on placing the onus on the financial services sector to think ahead. “Firms could consider how they meet the needs and circumstances of older consumers. They could consider how this affects the design, delivery and evaluation of financial services products, marketing and distribution channels”. It is a great pity that HM Government and the FCA did not foresee such problems when major changes were introduced in pension legislation and notably with the Retail Distribution Review (RDR) reforms.

The fallout of RDR has caused face-to-face advice to become the province of the high net worth and all attempts to streamline investment advice have so far floundered and lower income groups and the elderly have been made more vulnerable as low cost advice is not readily available. The EU is not always to blame as much UK regulation is gold plated.

Regulation has evolved in a piecemeal fashion often shutting the door while the horse is galloping over the hill. To date both the FSA and FCA have been intent on chasing consumer detriment and market developments. The downside of new regulation is that it is expensive and ultimately the consumer pays – be it in charges or withdrawn services – was that the objective?

We now have a massive regulatory programme in spreading the Senior Managers and Certification regime across the financial services industry but is it money and time well spent? We are in essence dealing with a moral code so it would have been far cheaper and indeed more effective simply to have established personal liability in UK law for any firm in contravention of the existing ‘Principles for Businesses’ (eg treating customers fairly)?

In Summary

Clearly, greater protection will always be required for vulnerable individuals. Caveat emptor only has a place where all parties are informed and aware of any risks and sadly, the future is an area where none of us can be confident. For the majority, it is essential that individuals plan ahead with their family for a time when dementia might be an issue. We ignore the impact of an ageing population at our own peril.

Roger Davies is Principal Consultant at Limehouse Consulting.

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