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BABY BOOMERS “BOOM” Survey indicates that, as in all areas of their lives, baby boomers By Phil Zinkewicz
Ever since the end of World War II, when “baby boomers” first began making their presence known in the world, marketers of products and services set their sights on satisfying what was to be decades of baby boomers’ wants and needs. From diaper services in the 1950s, to hula hoops for baby boomer pre-teens, to rock and roll for baby boomer teenagers, to sleek automobiles for baby boomer adults, marketers targeted this massive block of citizenry. Ken Dychtwald, renowned gerontologist and president of Age Wave, a U.S.-based consultancy practice that conducts surveys on various topics, sums up this phenomenon. “Baby boomers didn’t just eat food; they transformed the snack, restaurant and supermarket industries. They didn’t just wear clothes; they transformed the fashion industry. They didn’t just buy cars; they transformed the auto industry. They didn’t just date; they transformed sex roles and practices. They didn’t just go to work; they transformed the workplace. They didn’t just get married; they transformed relationships and the institution of the family. They didn’t just borrow money; they transformed the debt market. They didn’t just go to the doctor; they transformed health care. They didn’t just use computers; they transformed technology. They didn’t just invest in stocks; they transformed the investment marketplace.” When Dychtwald started Age Wave in 1986, it was because he reasoned thus: “It became obvious to me that the aging of the baby boomers—combined with increasing longevity and declining fertility—were triggering a demographic shift of enormous magnitude—an ‘Age Wave.’ This wave had the potential to create myriad social, economic and political crises, as well as an unending stream of new business opportunities.” Baby boomers have been influential in the area of financial services as well. As soon as baby boomers were old enough to begin earning money, banks, insurance companies and investment firms began designing and re-designing their services to lure the baby boom audience. As baby boomers moved into their thirties and forties, various retirement products began to surface, promising baby boomers they could live out their sunset years in prosperity. Now, the results of a recent study conducted by Harris Interactive under the guidance of HSBC and managed by Age Wave may present marketers of financial services with new challenges. HSBC has published what it describes as “the world’s most comprehensive study on global attitudes to ageing and retirement.” The study shows that, for many people, traditional retirement is a thing of the past. Eighty percent want to scrap mandatory retirement and 75% want to keep working in their maturity. Less than a quarter (21%) of the respondents of all ages said that never working for pay again would form part of their ideal retirement. Titled “The Future of Retirement,” the study interviewed more than 11,000 people worldwide and examined attitudes in Brazil, Canada, mainland China and Hong Kong, France, India, Japan, Mexico, the UK and the USA—countries and territories which contain over half of the world’s people and combine to give a representative sample of the global population, the survey says. (The study can be accessed at www.hsbc.com/homepagecs02.) “The aging of the baby boomer generation, declining fertility rates and increasing lifespans are combining to create new and complex demographic pressures across the globe,” said Sir John Bond, group chairman of HSBC. “The resulting changes will, in many cases, be very positive, but they also create real challenges, not least with regard to the funding of retirement.” Bond said that the study found that people of the world are already creating their own solutions. “For example, we found that people are not simply expecting to work longer, now they want to mix work and leisure, learning and rest. It is critical that governments, regulators, corporations and financial institutions understand these emerging trends in behavior and attitude if we are to successfully tackle the pressing issues before us.” In six of the 10 societies surveyed, alternating work and leisure was seen by the majority as the ideal “later lifestyle,” already a major shift away from the notion that later life is dominated by passive retirement, said Bond. He said also that, even in India and the UK, the most skeptical about flexible work arrangements, more than a quarter want to take on some work in their later years. “The median age of the global population will increase dramatically by 2040, straining the funding of retirement,” says Bond. “But given the choice between increasing taxes, reducing pensions or raising the retirement age to ease this burden, 45% of the respondents worldwide chose the latter, emphasizing the desire of many to make their own decisions. Just 26% said they would accept higher taxes and only 15% opted to reduce pension benefits.” Said Dychtwald: “The new way of thinking highlighted by this research should change the way governments, companies and financial institutions deal with aging and retirement. Instead of adhering to the traditional model where individuals go to school, spend many years working and then retire, we need to think about a truly blended life plan where people can cycle through periods of work, leisure and education. There is a clear need across the world for better, smarter advisory services combined with more flexible, more transparent savings and investment products. It would be foolish to ignore the economic realities driving some of these changes in attitude, but they are no more important than the increasing quality and length of later life that leaves us wanting more than our parents and grandparents expected from retirement.” Bond added: “Few issues are as important to our customers as planning for their later years. This research gives us, and we hope many others, an invaluable insight into how attitudes and ambitions are changing around the world. We remain committed to exploring this area more fully, using our findings to guide our own products and services to better fit the increasingly complex, increasingly flexible demands of consumers as well as adding a new dimension to the global debate.” Because of the wide-ranging implications of this study, Rough Notes posed some questions to Steve Troop, a spokesman for HSBC. Asked what the insurance industry should learn from this study, Troop said: “Until now, it has been easy to focus on the demographics of retirement issue—the increasing population imbalances, the shortage of funds, the proportion of over 65s per capita—mainly owing to a combination of increased longevity and declining fertility rates. The insurance industry needs to recognize that, like any consumer-driven business, the attitudes and desires of the customer are just as important. HSBC has always had a strong customer focus, and by understanding what insurance needs its customer base has, HSBC can ensure products and solutions are developed to combat both demographic and individual requirements of the future. Addressing customer needs is key to the insurance industry and where customer behavior changes, it is important that product ranges are flexible enough to incorporate new requirements a changing lifestyle may have.” Asked whether the attitudes expressed in this survey will change the design of pension and employee benefits products, Troop said: “The design of retirement, pension and employee benefits products is almost certain to change. The key questions are how and when. Product design changes almost always follow an evolutionary process and it is too early to accurately predict the path such an evolution will take. The developing requirements of consumers will certainly be an important influencing factor in the shape of products to come, whether this includes annuity products becoming redundant, or ‘inheritance pensions’ that can be passed from one generation to the next. Employee benefits will adapt in a similar manner, to meet the demands of an emerging generation that hopes to enjoy a more flexible lifestyle that might include gap years for education or leisure, and increasingly common periods of part work and part hobby. These changes will emerge as consumers demand the choice and flexibility we anticipate from the results of this survey.” Rough Notes asked Troop whether government retirement programs will be altered if the survey’s findings are realized. “It is difficult to generalize about government retirement programs as they are so diverse and built upon many different sets of politics, assumptions and objectives around the world,” he said. “Many existing programs are under pressure as older generations grow in size, and many accept that some changes will be needed in the coming years. The survey prompted respondents to choose one of three options to what they felt the government should do first when tackling the situation. “The three options were: raise taxes, increase the retirement age or reduce pensions. Overwhelmingly, people opted to increase the retirement age. Combining this knowledge with that from other questions, we see that most people in most populations are generally aware of the aging phenomenon and are beginning to accept some responsibility for their future. This is not a unanimous thought, but a significant majority,” Troop continues. “This suggests that increasing the retirement age might be a step that some countries choose to take. The survey also revealed one other fact in absolute clarity. People do not want to be forced out of work at a specific age. Most people (up to 95%, depending on the country) felt employees should be allowed to continue doing their job so long as they were able. Combining this with what we already know, we see that people want the option to work in later life, and both governments and employers would be wise to acknowledge this within any program reforms that are made.” Finally, asked what form later-life employment might take and how this would affect the property and casualty insurance industry, Troop said: “There is a strong suggestion from the survey that employment in later life is likely to take a different form to traditional employment patterns. Most people chose their optimal later-life plan to either include working part time, or going back and forth between periods of work and leisure. Again, providing consumers with choice and flexibility of working patterns is the key. Insurance products will follow suit. If the trend turns out to be a large number of self-employed home workers, there will be the inevitable evolution of related products to match the market. Whether new products need to be developed, or existing ones adapted, HSBC will be closely following their customers’ demands and ensuring they can provide appropriate products and services. Mature drivers are already a very attractive market, a factor reflected in more sophisticated rating processes that incorporate age and driving history. As ever, rating and pricing will be led by claims experience.” * |
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