The three ages of man
I was looking at Titian’s famous “Three Ages of Man” painting the other day and it seemed just as intriguing and compelling today as I guess it did when he finished it six centuries ago. And that got me thinking about those three ages and what they might look like today in the 21st century.
In spite of all the societal challenges I would suggest that the first age, say from one to eighteen, is for most children in the developed world, pretty good and for some quite wonderful. It’s about playing, learning, and having fun. No dependents, no responsibilities, no serious money worries. Making new friends, enjoying new experiences. Parents taking care of almost everything. Life is pretty simple. Of course, at this time, most first agers don’t recognise the absence of the strains and pressures experienced by “grown-ups” as they are wrestling with their own physical and emotional growing pains.
Further education and first jobs signal the ending of the first age. But, for an increasing number of early second agers, parents still provide emotional and financial support. And sometimes this includes providing food and a roof over their heads. In the meantime; sex, drugs and rock and roll. Maybe not all of that now. Or maybe none of it! Whatever; as time goes by, reality strikes and the second age begins in earnest for everybody. And what a struggle it can be; financially, emotionally and intellectually.
As far as finance is considered, for many, university tuition fees loom large on the horizon and for almost all, credit card bills mount up with astonishing speed. Interestingly both are relatively new problems. But finding somewhere affordable to live has always been stressful. And saving money virtually impossible; even as salaries increase. Thank goodness for auto enrolment.
But it’s not just about money. Having lived life as dependents, second agers now have dependents. Juggling careers and looking after children is extraordinarily stressful and difficult choices have to be made. And it’s not just children. Having been looked after by their parents when in first age, second agers may now find themselves looking after those parents, due to their failing mental or physical health. On top of this; for many second agers, work is now far from nine to five, with millions of workers dealing with work related issues on mobile devices when travelling to and from the office, and during evenings, weekends and vacations. It’s like running on a treadmill without a stop button.
In the 20th century, there was a stop button. It was labelled “retirement”. The second age for most men ended exactly on their 65th birthday. They could then look forward to about ten years of leisure, often with a guaranteed pension from their employer.
Nowadays, things are much more complicated. Longevity improvements have doubled the time to the end of the third age. And pensions freedoms and other developments enable the wealthy ones to start the third age at 55 with a plethora of options available to them and a need to plan for the next 30 or maybe 40 years.
I guess the starting point for the plan is sorting out pensions and other investments. Clearly that is a fundamental role for a financial adviser. But, of course, there are a great many other issues that need to be addressed. For example, some third agers may be looking to start a business and may be looking for finance. Some may be looking for a new career. Others may have decided they want to move abroad and just soak up the sun. Whatever the circumstances and objectives, financial advisers are well equipped to support and advise.
Another fundamental role for the financial adviser is around insurance. People entering the third age will need help in getting this right. The company private health plan will have gone and a new one might be required. The same goes for the death in service life cover. And all of this has to be organised around IHT planning, wills, lasting power of attorneys and so on. To repeat: “Things are much more complicated”
Third agers are likely to be the segment that is most attractive to scammers. And I think that financial advisers are in a great position to coach clients in this space. Sometimes when people talk about the value of on-going service fees I suggest that the coaching that takes place has probably saved clients many millions of pounds. Of course, keeping third agers safe and advising them on all of these other “retirement” issues is a hugely valuable service and is implicit in most financial adviser propositions. But I continue to wonder why no one has yet made it explicit and exclusive, packaged it and promoted it powerfully.
The market is huge with more than £1trn of investable assets in the hands of third agers and about £500bn of DC pension funds on their way into this space over the next decade. And Sir Steve Webb, using realistic and informed assumptions, recently estimated that the potential for DB to DC transfers could involve additional fund values totaling around £750bn. These numbers are breath-taking. The opportunity clear. So why is there no strong consumer brand in this space? Is it just a question of time? Or is it that the regulatory environment is such that investing to create a compelling third age advisory business proposition and a national brand carries too much risk?
I think it is just a question of time. And the winner is likely to be an organisation with an existing footprint in this space with access to the substantial funding necessary to get such a business off the ground. The proposition be much broader than the traditional model and will involve multiple channels including physical face to face and on-line. and I suspect that the funding will come from an existing, relevant, consumer brand which already resonates positively with wealthy third agers.