If wealth is not to remain something for the wealthy, the key is to understand consumers better, get them to engage with their money and drive better financial well being through behaviour change. Given the link between money and mental health – money worries being the key source of stress for the majority of people – the challenge is both enormous and fundamental.
The recent WeathTech 19 event, run by Blackrock took a focus on wealth and well-being. Financial security scores very highly in consumer surveys. Around 92% indicated this was a prime life goal, yet only 39% of respondents rated their financial health as excellent or good in research quoted by Mark Adams, Head of Innovation at Vice Media in the opening keynote. This mismatch has serious implications across our lives.
The shortfall in savings to cope with income shocks or crises is well documented, as it is in long-term (pensions) savings. The flow of income across working life means the well remunerated can expect a comfortable stockpile of wealth when they retire whilst the rest face some frightening gaps. In the near term, 70% of those surveyed reported less than two months worth of savings to tide them over in a crisis.
The way to overcome those shortfalls across all income groups – start early, save often and keep it going until you stop working (the power of compounding interest) – was iterated by speaker after speaker across the day. This sounds straightforward but, apart from the wealthy, most providers have failed in their mission to reach the mass of consumers. If governments are increasingly pulling back from plugging the gaps and, in the UK context, auto enrollment only gets us part of the way there, can the solutions be found in newer technologies or WealthTech?
Engagement is crucial but so many financial services institutions get it wrong. They typically divide consumers by arbitrary groupings – age, gender, occupation – that simply don’t resonate with many people, particularly the young. Tapping into the ways in which young people identify themselves is key to creating greater engagement. Finding and engaging with networks of people in order to illustrate their passions or purpose or tribe is how you reach customers, says Adams. As opposed to clunky, tone deaf marketing campaigns. In a world of hyper content creation and access channels, passion and purpose have impact.
However, understanding customers must go beyond a focus on millennials. The needs of an ageing population, who although are working longer, are not accumulating enough wealth (as a whole) to last across what may well be a 100-year life. Technology has the potential to help underpin better solutions but the lack of understanding of this market acts as a barrier to effective product development in many financial institutions.
Older generations will have different attitudes to money (and needs) and may prefer their interactions to be more embedded in the community, compared to those who are just now thinking about retirement. Technology is not a barrier to reaching this group. Outdated attitudes around how older people react to and use technology are driven by ageism rather than reality. Those between the ages of 35 and 55, called ‘Generation Spreadsheet’ at the event, may be more resistant to change than an older person who has never experienced the joy of creating a satisfying spreadsheet. (and there is ‘joy’ to be had) The key, again, is informed design and not a one-size fits all approach.
There is a need to ‘democratize investment’, according to Noah Kerner, CEO of WealthTech company Acorns, during his fireside chat at the event. He goes on to say that wealth creation for the non-wealthy, means creating simple, transparent ways to save little and often (for starters). Financial literacy comes from ‘doing’ and that ‘financial education which has little or no impact.’ Kerner saves particular comment for condescending advice, such as to skip the morning takeout coffee, (recently offered by JP Morgan). “Have the coffee,” he says, “but make having the coffee an opportunity to save and invest.”
The challenge is huge but so are the rewards, both for the companies that can create a product with mass market appeal and for those who can build up their wealth. Financial well being feeds into every part of an individual’s life – impacting health (physical and mental), relationships, future prospects, and families. It may be hard to define exactly what it looks like, but the deleterious impact of its absence is clear.