Societal change and changing financial services

Demographic and societal change should be the easiest change to respond to

Tuesday, September 18th 2018, 9:04AM 1 Comment

by Russell Hutchinson

Because it is slow, largely predictable, and happens all around us. Yet examples abound of companies that failed to recognize change and respond appropriately.

Sometimes, societal change is seen as something to be resisted: like the famous example of a New York department store in the 1920s which actually limited the floor space available to its washing machine sales – because they felt they were selling too many.

Perhaps societal change happens to be one of the hardest to spot partly because it is so slow and happens all around us.

When I think about the changes New Zealand has experienced over the last 25 years, I realize that they have been enormous. But what will happen over the next fifteen years?

These thoughts were picked up from the recent FSC conference, so while I claim no particular credit for them, I happen to agree with most of them:

In the next 15 years, for example, 20-22% of NZ will be over 65 (currently 15%), whereas 75% of the work force will be millennials. In Auckland, at least, between a third and a half of the workforce will have been born somewhere else. Those are three big trends with impacts on most financial services businesses. We could expand the list.

The growth of the ‘young-old’ segment represents an opportunity for financial advice, but a challenge for those whose business is based on insurance – and particularly life insurance. Most people lapse their life and income protection cover before age 65.

But they try to retain their medical insurance and have a growing interest from age 50 in their savings.

Millenials are seen as more personally demanding – expecting you to be able to vary your service just for them.

Whereas the large number of people who started their lives in a different country may require more assistance with language and a more careful examination of their assumptions. Even if you have only come from Australia, you may be amazed to discover that medical insurance is underwritten, for example.

Over the next 15 years we will also see more and more children from generation Z take their place in the workforce. Born into the age of technology – often referred to as ‘digital natives’- they expect to have easy, simple, and fast online transactions.

But they also expect personalized support when such facilities fail, or the complexity of their requirements grows, and are supposed to lack patience.

Although I am cautious about generalizations, about both markets and solutions, I am challenged to think – how, specifically, is financial services changing to meet the needs of these changing markets?

Tags: Russell Hutchinson