This post was written by Christopher Walker
In mid-2019, the FCA begun its policy discussion around “Intergenerational Differences”, exploring the changing financial needs of those across different age ranges - often categorised into four reasonably well-known brackets:
- “Generation Z” (those born since 2000);
- “Millennials” (those born between 1981 and 2000);
- “Generation X” (those born between 1966 and 1980); and
- “Baby Boomers” (those born between 1946 and 1965).
At this time, the FCA wanted to:
• test publicly their understanding of the issues different generations face;
• bring together stakeholders to pinpoint the issues which need a response;
• identify where, if any, potential action could help the market meet changing
consumer circumstances and needs across different generations
The FCA’s initial work here continues in Feedback Statement 20/12 (“FS20/12”), which presents its approach following the Discussion Paper and sets out:
• why intergenerational difference is an important issue for the FCA, the financial services sector, and for the users of financial services that the FCA is here to serve;
• the FCA's key findings on areas where evolving consumer needs could be better met by financial services.
The FCA's findings
The FCA applied the feedback it received to its 2019 discussion paper and determined:
1. consumers need better support to manage increased responsibility and
additional exposure to risk
2. consumers need more hybrid and flexible products to meet their evolving
3. certain consumer segments cannot access lending products needed for their
4. consumers need access to better products to fund long-term care
5. consumers may not have sufficient savings levels to meet future financial needs
The FCA does not believe it would be appropriate or proportionate to pursue bespoke remedies, including rule changes, in response to these findings.
Coronavirus will increase financial challenges for all consumers
It is difficult to declare precise conclusions as to what the long-term impact of COVID-19 will be on the generations, but the pandemic may further exaggerate existing generational inequalities, such as those identified within FS20/12.
Whilst older generations continue to be impacted by the adverse health effects of coronavirus, data detailed within the FCA’s Insight blog demonstrates that the financial impact of the younger generations is often the most severe, with 60% Generation Z working in “COVID-impacted” sectors, and reporting millennials may be the most likely to “suffer negative financial outcomes in the next six months”.
The lived experience of government restrictions relating to coronavirus raises different financial challenges for each generation, resulting in different needs and vulnerabilities. For example, older consumers, who are typically more reliant on physical cash, face health concerns related to the handling of physical cash. At the other extreme, many younger consumers who are attempting to enter, or have only recently joined, the labour market face uncertainty over employment, often
while carrying significant debt.
While the pandemic has created significant short-term volatility in our financial and non-financial lives, the FCA believe it is too early to meaningfully interpret its longer-term impact on specific generations. However, its initial view is that coronavirus make these more acute.
Few of us will emerge from this crisis untouched, whether in terms of health or finances. But it is equally clear that the effects differ by generation, from the most direct impacts through to second-order implications.