FINANCIAL INNOVATION FRONTIERS - APRIL 2017 - AARP
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Financial Fitness
Healthcare Emergencies
Retirement Readiness
APRIL 2017
FINANCIAL
INNOVATION
FRONTIERS
$
? ?
? !$
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$
? ? $
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INTRODUCTION A GENERATION OF DIGITAL
TABLE OF ! PAGE 4 ADOPTERS, ADAPTERS,
AND PIONEERS
CONTENTS
PAGE 14
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!
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50+ CONSUMERS
FACE UNPRECEDENTED
!
FINANCIAL COMPLEXITY
PAGE 20
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CONCLUSION 50+ CONSUMERS ARE OFTEN
!
PAGE 38 ILL-PREPARED (YET THEY DON’T
ACT THAT WAY)
PAGE 30
!
2 Financial Innovation Frontiers 2017 | 3INTRODUCTION
7 STRESS FACTORS
PRESSURE 50+ M
eet the most financially challenged generation in American history.
There are over 111 million Americans aged 50 and older, confronting
CONSUMERS
a financial future that AARP’s Financial Innovation Frontiers Study
describes in terms of high anxiety, great struggle, and kitchen table economics
that are more complex than any generation has ever faced. Most of them
are at a critical juncture: financial decisions are numerous and amplified
in importance because they can have a lifetime impact on their later years.
? ?
And time and again, they are voicing a question that should echo throughout
the financial services industry:
“
$
Where do I start and whom
? ? do I turn to for help?”
$
? $ Much is at stake, not only for 50+ consumers but also for the banks, brokerages,
insurers, fintech startups, venture capitalists, policymakers, and other players
? ? that enable consumers to address that question effectively. Although the 50+
segment represents only 35% of the entire U.S. population, they control more
than half of the nation’s investable assets. And they are avid users of digital tools,
services, and products that will serve the next wave of consumers who soon will
confront the final years before they retire.
S OM E BA C KG ROUN D
A ARP’s 2017 Financial
Innovation Frontiers
study offers ample evidence
adapting to technological
change that has fundamentally
touched virtually every
That has only accelerated
their demand for change
to accommodate their
that the digital acumen aspect of their daily lives. expectations for always-on,
of 50+ Consumers is not And they didn’t miss a beat ever-present interaction
to be underestimated. They with the introduction of that amplifies the power
have spent their adulthood the smartphone a decade ago. of real-time decision-making.
4 Financial Innovation Frontiers 2017 | 57 STRESS FACTORS PRESSURE 50+ CONSUMERS FINANCIAL INNOVATION FRONTIERS
At the head of this wave a generation of Americans don’t know where or how 21S T C EN T URY FI N A N C I A L S T RES S FA C T ORS
is an affluent, technologically that has enjoyed rising to start tightening their belts.
proficient segment of consumers
who represent more than
incomes. Yet they are
straining to cope with debt,
In their scramble to manage
their finances with every T hey carry digital devices. They use them regularly, too – even when it comes to something
as important, private, and challenging as managing their money. And they’re desperately seeking
answers to seven financial stress factors that increasingly are part of life in the 21st century economy:
half of all consumers 50 and are racing to catch up on available tool, they are turning
older—and 70% of those are saving, and are worrying to alternative financial 1. The impact of unexpected expenses and financial emergencies.
a decade or less away from they must scale back their services and products when The increase in the number of dual-income households has enabled
the traditional retirement age retirement dreams. They have traditional approaches $ couples to lift their standard of living and flex their buying power.
However, households that stretch to buy or rent in the best school
of 65. They tell a story of good savings habits, yet they fail them.
districts are at heightened risk if they suffer unexpected expenses,
financial emergencies, and the seismic shake triggered by events such
as a layoff, divorce, or an illness.
2. The realities of caregiving for parents. Many adults financially
support and care for parents, often from a great physical distance.
Many anticipate that expenses of financial dependents will decline
after children leave home and instead these costs are often replaced
by those associated with caring for aging parents.
3. The burden of student loans. Rising college costs have put many
$
50+ Consumers in a position to bear the burden of multigenerational
student loans for their children, their grandkids, and sometimes even
their own decades-old debt.
$
4. The personal responsibility of saving for retirement. The shift from
defined-benefit pensions to 401(k)s and other defined-contribution
plans is forcing ever-growing legions of ill-prepared workers to assume
responsibility for saving for retirement, tending investments, and
drawing down assets.
5. The rising cost of healthcare. Healthcare costs are forcing more
Americans to evaluate complex medical insurance plans, budget and
shop for affordable care, and track and document mounds of bills,
deductibles, co-payments, and reimbursements.
6. The overwhelming complexity of financial products. The growing
variety and complexity of financial products are overwhelming for many
% Americans whose financial understanding leaves them ill-prepared
to take a comprehensive view and balance the interplay of investments,
$ taxes, insurance, and regulation.
7. The lack of tailored and helpful digital tools. Ready access to digital
information has empowered Americans to be self-sufficient, and there
?
is no lack of tools aimed at helping Millennials manage their spending
and burgeoning financial lives. Yet today’s digital tools typically fall short
for the do-it-yourselfers in the 50+ segment, let alone those with less
financial experience and digital knowhow.
6 Financial Innovation Frontiers 2017 | 77 STRESS FACTORS PRESSURE 50+ CONSUMERS FINANCIAL INNOVATION FRONTIERS
TH E C L OC K I S TI CK I N G FINANCIAL OPPORTUNITY IN THE 50+ SEGMENT
A ll too often, 50+
Consumers don’t know
how to balance glass-half-full
Consumers who are facing
down retirement and
desperately playing catch-up.
F inancial services has seen
no shortage of breathless
enthusiasm for the Millennial
in 2017. That represents
a combination of revenue
derived from checking and
sector by the end of 2017,
and that number is expected
to grow by a healthy 4.25%
dreams while also preparing At that stage, hitting retirement generation, with banks and savings (DDA) relationships, annually through 2021.
for glass-half-empty risks. targets can require dramatically startups clamoring to be the credit cards, and consumer Furthermore, this industry
Opportunities abound for revising how a household first to understand and serve lending. AARP expects that is gradually encroaching
financial innovators who defines its standard of living. the needs of young “digital total to reach $123.7 billion on the traditional financial
can rethink their products Identifying ways to save natives” and “the mobile-first by 2021. services space, syphoning
to address the needs of and invest is critical for all age generation.” But what about But crucially, 50+ Consumers off $1.6 billion from
the millions of digitally groups, but the urgency is the rest of Americans? increasingly find that their banking revenue on DDA,
proficient 50+ Consumers. amplified for 50+ Consumers. Americans 50 and over needs are not met by bank consumer credit card
For example, there has been 50+ Consumers readily account for an enormous offerings alone. The 50+ and lending products
a recent burst of creative wield the necessary digital portion of the traditional segment will spend $15.3 in the next four years,
apps and tools with the devices. They are open to banking industry, to the tune billion in the fast-emerging in addition to $1.2 billion
admirable goal of helping trying new approaches. They of $116.8 billion in revenue alternative financial services in organic growth.
Millennials. They typically to paycheck, especially if the have proven they can adapt
develop a savings habit by savings are invested wisely to rapid technological change. U.S. FINANCIAL
U.S. FINANCIAL SERVICES
SERVICES REVENUE:
REVENUE: CONSUMERS
CONSUMERS AGE
AGE 50+
50+ (FORECAST)
(FORECAST)
squirreling away dollars here to take advantage of the chief What they lack are the
and there and stashing away advantage of youth: time innovative digital tools, services, Alternative financial
services revenue (50+)
5-Year Traditional financial services: $600.7B
the “change” every time they and compounding. and products necessary Revenue Alternative financial services: $83.0B
Traditional financial
Totals All financial services: $683.7B
swipe a card. This approach But that dimes-and-quarters, for a generation facing uniquely services revenue (50+)
can be meaningful for save-over-time approach complex financial times.
Millennials living paycheck is of little value to 50+ And the clock is ticking. $139.1B $141.7B
$140B $134.2B $136.6B
$132B In billions:
$17.2B $18.1B
$15.9B $16.5B
$15.3B
$
$120B $141.7
$100B $132.0 $18.1
$80B $15.3
$116.8B $118.4B $120B $121.9B $123.7B
$123.7
$60B $116.8
$40B
$20B 2017 2021
$0
2017 2018 2019 2020 2021
8 Financial Innovation Frontiers 2017 | 97 STRESS FACTORS PRESSURE 50+ CONSUMERS FINANCIAL INNOVATION FRONTIERS
SINGLE-INVESTOR
SINGLE-INVESTOR
SINGLE-INVESTOR
SINGLE-INVESTOR REVENUE
REVENUEREVENUE
REVENUE FINTECH INNOVATORS CAN TARGET
SINGLE-INVESTOR REVENUE
OPPORTUNITY
OPPORTUNITY
OPPORTUNITY
OPPORTUNITY
OPPORTUNITY
Credit card opportunity:12.5% market share in growth
Credit
Credit card
card opportunity:12.5%
opportunity:12.5% market
market share
share in
in growth
growth
MULTITRILLION DOLLAR FINANCIAL GAPS
T
Credit card opportunity:12.5% market share in growth
Consumer
ConsumerConsumer
lending lending opportunity:12.5%
lending opportunity:12.5%
opportunity:12.5% market market
market share
share inshare
in
Consumer lending opportunity:12.5% market share in growth
growthin growth
growth he likelihood that 50+ that they would be far better Three key opportunities that
DDA products:12.5% marketinshare in growth
DDA
DDA products:12.5%
products:12.5% market
market share
share in growth
growth
DDA products:12.5% market share in growth Americans will achieve prepared if they could turn to merit spotlighting: helping
$48.1 $48.1
$48.1 Credit card
$160.6M $160.6M financial freedom rests on them trusted financial innovators who Americans avoid or catch up
$39.5 $39.8 $48.1 Credit
Credit card
card
Credit card
opportunity
$160.6M
opportunity
$160.6M
$39.5
$39.5 $39.8
$39.8 opportunity
$33.3 $33.3
$33.3 $39.5 $39.8 $37.1 $37.1
$37.1 opportunity
Consumer $123.9M
making wise decisions both in could guide them as they spend, from financial setbacks related
$30.7 $30.7$37.1 Consumer
$123.9M
$123.9M
$33.3 $30.5 $30.5
$30.5 $30.7 Consumer
Consumer
lending
lending lending $123.9M the spur of the moment and save, borrow, invest, insure, to job instability, life-altering
$25.7
$25.7 $25.7 $30.5 $30.7 lendingopportunity
opportunity
opportunity
$25.7
$18.5
$18.5
opportunity
$18.5
DDA DDA $61.6M $61.6M$61.6M
also as they prepare for health and plan their financial lives. events, and education costs.
$15.1 $15.1
$15.1 $15.2 $15.2$18.5 DDA
$15.2
$12.8 $12.8
$12.8 $15.1 $15.2 DDA opportunity
opportunity
opportunity $61.6M
emergencies and eventual Trillions of dollars are in Such events—which occur
$12.8 opportunity
Total Total market
Total market
market
opportunity
Total market $346.2M
retirement. One way or another, play for financial innovators with unfortunate frequency
opportunity
opportunity $346.2M
$346.2M
2018 20182019
2018 2019 20192020
2020 20202021 2021 2021opportunity $346.2M Americans will take their that tap into the large and significantly set back
2018 2019 2020 2021
financial journeys. But AARP’s and growing markets for financial progress—present
ALTERNATIVE
ALTERNATIVE FINANCIAL SERVICES
ALTERNATIVEFINANCIAL SERVICES
The opportunity is clear: ALTERNATIVE
ALTERNATIVE FINANCIAL
FINANCIAL SERVICES
SERVICES 2017 Financial Innovation 50+ Consumers who are ready opportunities for
FINANCIAL SERVICES
Ignoring the 50+ segment GROWTH
GROWTH BREAKDOWN
GROWTHBREAKDOWN
BREAKDOWN
GROWTH BREAKDOWN Frontiers study underscores approaching retirement. financial innovators.
translates to leaving money BREAKDOWN
on the table. For a single RevenueRevenue
Revenue shifted shifted
shifted from
from from traditional
traditional
traditional RevenueRevenue
Revenue shifted
Organic
shifted
shifted from
from
growth
from traditional
traditional
traditional services:services:
services:
in alternative
$1.6B $1.6B
$1.6B
services: $1.2B
1. CAREER SETBACKS: $4.3 TRILLION
to
toRevenue toshifted
alternative
alternative
alternative fromservices
services
services (50+) (50+)
traditional
(50+) Revenue
Organic
Organic shifted
growth
growth in
infrom traditional
alternative
alternative services:
services:
services: $1.6B $1.2B
$1.2B
investor addressing the needs to alternative services (50+) Organic growth in alternative services: $1.2B The 29% who have lost a job or experienced wage stagnation in the past
OrganicOrganic
Organic revenuerevenue
revenue growth growth
growth Total alternative services five years have saved $207,000 less, on average, for retirement. This will
of 50+ Consumers for non-bank inOrganic
in inrevenue
alternative
alternative
alternative services
services services
growth(50+) (50+)
(50+) Total
Total alternative
alternative services
services growth:growth: $2.8B
growth: $2.8B $2.8B
Total alternative services growth: $2.8B
in alternative services (50+) represent a $4.3 trillion retirement savings gap by 2021.
DDA, consumer credit Career Career
Career setbacks
setbacks
setbacks
Career setbacks
(19.7M) (19.7M)
or lending products, tapping (19.7M)
(19.7M) 2. UNPLANNED WITHDRAWALS: $4.1 TRILLION
$700M$700M
$700M
the growth in the market $700M The 21% who tapped their savings to cope with a life event such as
without replacing existing divorce or a medical emergency in the past five years have saved
players is a multimillion-dollar $600M$600M
$600M $270,000 less for retirement. This will represent a nearly $4.1 trillion
$600M StudentStudent
Student retirement savings gap by 2021.
opportunity. By the end loans loans
Student
loans Withdrawals
Withdrawals
loans Withdrawals
of 2021, an investor who stakes (6.5M)(6.5M)
(6.5M) Withdrawals
(14.2M)(14.2M)
(14.2M)
$500M$500M
$500M (6.5M) (14.2M) 3. STUDENT DEBT: $1.3 TRILLION
$500M
a 12.5% share in any of these The 10% burdened by student loans in the past five years have saved
markets could have potentially $510M
$510M
$510M
$182,000 less for retirement. This will represent a nearly $1.3 trillion
earned between $61.6 $400M$400M
$400M $510M retirement savings gap by 2021.
$400M $378M
$403.6M $378M
$378M
million and $160.6 million $403.6M
$403.6M $378M
$403.6M
from customers 50 and $319.1M
$319.1M
$319.1M FORGONE
FORGONE
FORGONE $4.31 $4.31
$300M$300M$319.1M
$300M FORGONE Career Career
Career $4.07 $4.07
$4.07 $4.13 $4.13
$4.13 $4.19 $4.19
$4.19 $4.25 $4.25
$4.25
$4.25
$4.31
$4.31
over. Consumer credit is the $300M
RETIREMENT
RETIREMENT
RETIREMENT
Career setbacks
setbacks
setbacks $4.07 $4.13 $4.19
$4.01 $4.01 $4.07 $4.07
most lucrative market
RETIREMENT setbacks
$3.85
$3.85 $3.85 $3.90 $3.90
$3.90 $3.95 $3.95
$3.95
$3.95
$4.01
$4.01
$4.07
$4.07
SAVINGS
SAVINGS
SAVINGS Withdrawals
Withdrawals
Withdrawals
$3.85 $3.90
for investors, with lending $200M$200M
$200M SAVINGS to
to coverto
cover cover major
Withdrawals
major
major
to coverexpenses
$200M
DUEDUE TO expenses
expenses major
DUE TO
DUE TO expenses
close behind with a 12.5% $319.8M
$307.4M$319.8M TO
market share equating $100M$100M
$100M $277.3M$307.4M
$254.2M $277.3M
$254.2M
$254.2M $277.3M $307.4M
$307.4M
$319.8M
$319.8M BURDENS
BURDENS
BURDENS StudentStudent
Student
Studentloan $1.18 $1.18
$1.18 $1.20 $1.20
$1.20 $1.22 $1.22
$1.22 $1.24 $1.24
$1.24 $1.25 $1.25
$1.25
$100M $254.2M $277.3M BURDENS loan
loan
loan ownership
ownership
$1.18
ownership
$1.20 $1.22 $1.24 $1.25
to $123.9 million in revenue ownership
2017 2017
2017 2019 2019
2019 2020 2020
2020 2021 2021
2021
over the next four years. $0
$0 $0 2017 2019 2020 2021
$0
2018
2018 2018 2019
2019 2019 2020
20202020 2021
20212021
10 2018 2019 2020 2021 Financial Innovation Frontiers 2017 | 117 STRESS FACTORS PRESSURE 50+ CONSUMERS FINANCIAL INNOVATION FRONTIERS
5 KEY ARE AS W H E R E F I N A N C IA L INN O V A T O R S T HE FI N T EC H UN I VERS E T ODA Y
C A N H EL P
S cores of fintech players are taking aim at ways to disrupt the traditional ways that
50+ consumers monitor their day-to-day finances, tackle larger financial planning issues,
A ARP’s 2017 Financial Innovation Frontiers study spotlights key financial
needs for 50+ Consumers. Here are five key areas where innovators can
have a transformative impact.
and prepare for unexpected financial setbacks.
FINANCIAL FITNESS HEALTHCARE EMERGENCIES
1. Remove friction from the user experience
· Enable consumers to choose the channel—or a blend BEHAVIOR FRAUD
·
of channels—they prefer.
· Satisfy real-time expectations for moving money.
·
DAY-TO-DAY GENERAL PLANNING
2. Improve customer service
OVERSIGHT
· Connect customers with advisers at pivotal moments.
RETIREMENT READINESS
·
· Take advantage of teachable moments by enabling
·
customers to learn in the context of a digital transaction. LIFE EVENTS
· Provide secure, authorized access to family and advisers. Abaris
·
3. Proactively deliver personalized insight and advice
DEBT MANAGEMENT SAVING
· Tailor products and services specifically to help consumers
·
prepare for financial shocks.
· Help Americans cope with ongoing healthcare costs.
·
· Help them save for retirement. DOCUMENT ACCESS
!
·
· Identify the appropriate amount of risk for each investor.
TRANSACTING
·
· Mine data for one-to-one insights and advice.
·
· Develop “robo writing” to redefine statements and on-demand updates.
·
4. Transform financial anxiety into digital empowerment *This does not imply endorsement; examples provided are selective representation of the ecosystem.
· Directly tie digital services to time-honored personal finance principles.
·
· Show customers a bigger, more comprehensive financial picture.
·
· Proactively coach consumers how to establish healthy financial habits.
·
5. Influencing regulatory change and financial policy KEY T A KEA W A Y S
· Encourage healthy digital disruption in key topics such as consumer
• 50+ Consumers represent • Career setbacks, • This generation is
·
protection, aggregation, the fiduciary role, the expansion of access
to government data, and new models to evaluate creditworthiness only 34% of the overall unplanned withdrawals facing seven financial
and sell loans. U.S. population but control for unexpected life stress factors that make
more than half of the events, and student debt this an unprecedented
nation’s investable assets. have caused retirement time of anxiety and
savings gaps totaling in the financial complexity.
trillions of dollars.
12 Financial Innovation Frontiers 2017 | 131/3
A GENERATION ALTHOUGH 50+
OF DIGITAL ADOPTERS, D
on’t make
CONSUMERS the mistake of thinking that 50+ Consumers are a paper-
35% 56%
REPRESENT ONLY THEY CONTROL
bound, analog generation that can’t get a grip on technological change.
They have witnessed and pioneered the mobile-first world their children
ADAPTERS, have inherited.
phone
They were a driving force as party-line rotary phones evolved into princess
handsets and then intoOFtoday’s smartphones. They used overnight
AND PIONEERS
OF THE ADULT U.S. POPULATION, THE NATION’S
delivery services, then fax machines,
INVESTIBLEand now electronic document scanning
ASSETS.
and mobile e-signature options. They looked at supercomputers the size
of a room and answered the question of whether Americans would ever want
!
35%
aALTHOUGH
personal computer
50+ CONSUMERS onREPRESENT
their desktop.
ONLY They witnessed the birth of the Internet
and itsADULT
OF THE movement to the office, the home, their palms, their wrists, their cars,
U.S. POPULATION,
and even into their “Frigidaires.” Today, 99% of 50+ Consumers own
THEY CONTROL
56%
a tablet, laptop, or a desktop device. Even the 70+ seniors are tech-enabled,
with virtually all owning a computer and 54% toting a smartphone.
Q
40% A35% 35% LOGIN 30%
When it comes to technology, theyOF adapted
it, and made it an essential part of American life.
INVESTIBLE
to it, adopted it, demanded
THE NATION’S
ASSETS.
50+ CONSUMERS’ INVESTIBLE ASSETS
***** ALTHOUGH 50+ CONSUMERS
35% 56%
REPRESENT ONLY THEY CONTROL
$ OF THE U.S. POPULATION, OF THE NATION’S INVESTIBLE ASSETS.
50+ CONSUMERS’ INVESTIBLE ASSETS
50+ CONSUMERS AND MOBILE DEVICES
ALTHOUGH
Today, 50+ in
we’re CONSUMERS
a mobile-first While ownership of before the Baby Boom
REPRESENT ONLY THEY CONTROL
35% 56%
era. When Americans have smartphones more than generation began in 1946.
a question or need information, tripled among U.S. adults Just like younger Americans,
they reach reflexively for from 2010 to 2015, many 50+ Consumers use
their smartphones—and that it jumped 11 times among their mobile phones for a lot
includes 50+ Consumers. consumers who
OF THE were born
NATION’S more than phone calls.
OF THE ADULT U.S. POPULATION, INVESTIBLE ASSETS.
14 Financial Innovation Frontiers 2017 | 15A GENERATION OF DIGITAL ADOPTERS, ADAPTERS, AND PIONEERS
!
IN
They text. They snap pictures. in a chat session for A significant number 50+ CONSUMERS HAVE ANXIETY ABOUT RETIREMENT
They post on social media. customer service. Commerce of holdouts are interested The result is that retirement innovation for 50+ Consumers: · 45% say they spend more
50+ Consumers also like has forever changed, in trying new features.
·
can be a topic of high · Only 26% say they are time and effort managing
** the convenience of using too, with 45% of 50+ For example, though only
·
anxiety for many 50+ highly confident they’ll their finances than they
mobile banking to manage Consumers saying they 10% of 50+ Consumers use Consumers. Currently, 41% even be able to meet their did five years ago, and they
their day-to-day finances. are comfortable shopping, biometric authentication of 50+ Consumers have financial needs over anticipate that need will
They monitor their accounts buying, and paying bills regularly or occasionally, retired, and 46% plan the next five years. increase over the coming
with text alerts, and engage on mobile devices. 22% would like to try it. to retire—with nearly 1 · Despite saving for an average five years.
·
50+ ARE ACTIVE USERS OF DIGITAL DEVICES in 6 planning to do so of 25 years, they have · Nearly half are confident
·
within 5 years. But here’s amassed less than half that they are best qualified
a significant disconnect of their individual retirement to manage their own money,
that points to the need savings goals, and 40% meaning that they are ripe
for effective, user-friendly, say they cannot feasibly for using new self-help options
and affordable digital retire until they meet this goal. enabled by digital tools.
99% 92% 76% 27% 7%
own a tablet, have high speed own a smartphone have a standard of those 50-64
laptop, and/or Internet service mobile phone have a smartwatch
THREE SEGMENTS OF 50+ CONSUMERS HAVE DIFFERENT NEEDS
desktop device No age group is a monolith with equal resources to address the same set of problems. AARP’s
2017 Financial Innovation Frontiers study reveals opportunities to target three segments
of 50+ Consumers—those who are particularly likely to use digital services to address their
50+ CONSUMERS AND FINANCIAL DECISIONS PERCENTAGE
OFfinancial squeeze, an affluent segment with more complex finances, and those for whom
Consumers preparing for day on a calendar, but financial in 10 of those approaching
U.S. ADULT
financial
POPULATION and 32% 25%
physical health 26%
are both in question. 17%
retirement at the traditional wellbeing might be no more retirement earns a pension,
age of 65 arguably have the than a shimmering mirage. compared with nearly half
PERCENTAGE
$ Three out of four are in the
critical period before the
ends meet (24%). As a result,
36% expect they must work
most to gain from innovative Comparing these Americans of those who have reached
digital innovation for one to those who are 65 or older retirement age. The shift
OF INVESTABLE 22% 24%traditional 28%retirement 26%
age— into their “retirement” years
ASSETS
simple reason: They must make illustrates the fundamentally to self-funded defined- ! facing make-or-break to support their financial
crucial—sometimes life- different retirement challenges contribution plans is wellA GENERATION OF DIGITAL ADOPTERS, ADAPTERS, AND PIONEERS
$
$
!
Confidence is! high: 93% 9 in 10 want to improve KEY AREAS WHERE FINANCIAL INNOVATORS CAN HELP
$
believe they can pay off their or maintain their health
debts. Many also share their to achieve their desired lifestyle CONNECT CUSTOMERS WITH in the context of a digital necessity because of failing
$
good fortune: 77% are as they age. Despite their ADVISERS WHEN IT MATTERS transaction, rather than health. Notably, 45%
paying student loans for awareness of the frailty of Digital tools are most powerful having to take the initiative of 50+ Consumers have
children or grandchildren, health, just 11% have recently when they promote one-to-one to conduct a keyword search unofficially authorized
FINANCIALLY SECURE and 31% say they’ll started saving for health interactions with advisers or comb through a library a partner or family member
41% of 50+ Consumers volunteer after they retire. emergencies, and they are at moments that are relevant of evergreen FAQs and generic to access depository and
47 million Americans
$ no more likely than 50+ and actionable. This puts educational material. Enable investment accounts by
These affluent Americans Consumers overall to buy a premium on a range customers to hover their sharing login credentials.
have generally benefited disability or long-term care of support options placed cursor or pop open a window This creates a need for more
from a combination of good $ insurance products. Their contextually within digital to learn more about a confusing secure ways to enable
fortune and good health. finances are tenuous. They channels and financial alerts. term, explore planning consumers to authorize
More than 1 in 3 has received are the least likely segment Done right, they will enable or product options, or view access, restrict what third
a lift from wise investments, to have saved in 401(k)s (34%) customers to initiate a text relevant fees and terms. parties can see and do,
inheritances, or trusts. Half or IRAs (30%), 36% have and video chat, click to call, and create audit trails and
are older than 65, but only HEALTH-STRESSED suffered a career setback that request a call-back, schedule PROVIDE SECURE, alerts that guard against
40% are fully retired. They 48% of 50+ Consumers affected their retirement an appointment, or share AUTHORIZED ACCESS fraud and elder abuse.
are more likely to have a 55 million Americans saving, and 25% have control of their screens. TO THIRD PARTIES Another need: Enable stewards
pension (37%), have IRAs Their financial health is closely taken withdrawls from Many 50+ Consumers share and heirs to track down
(62%) or a 401(k) (50%), linked to their physical health. retirement funds to pay for TAKE ADVANTAGE OF oversight of their financial accounts and assets that can
and many draw income from In the past five years 41% health care or other needs. TEACHABLE MOMENTS and medical matters. Sometimes get lost as 50+ Consumers
savings account interest have suffered a major medical As a result, 37% anticipate Digital tools will be more it’s by choice when they turn off traditional statements
(34%) and retirement plan event such as an operation that they must continue effective and satisfying when hire professional advisers, that can provide a paper trail
distributions (28%). or emergency room visit. About working into retirement. customers can learn sometimes it’s out of after death.
KEY T A KEA W A Y S
INNOVATOR PROFILE • When it comes to digital • Americans approaching AARP’s 2017 Financial
StickK technology, 50+ Consumers retirement have the most Innovation Frontiers study
Focused on changing behavior with psychological sticks and rewards, it enables users to define goals, have seen it all – from to gain from financial reveals opportunities
create binding “commitment contracts,” and appoint “referees” who track and evaluate progress. the birth of the Internet innovation for one simple to target three segments
FutureVault to the introduction of reason: They must make of 50+ Consumers with
A “digital safety deposit box” that enables users to share access with financial advisers to financial, the smartphone. When crucial—sometimes life- particular needs:
legal, and personal documents related to personal affairs as well as small business, trusts, and it comes to technology, altering—financial decisions.
they have adapted to Only 1 in 4 50+ Consumers · Overextended but
other entities. Digitally Engaged
it, adopted it, demanded is highly confident they can
*This does not imply endorsement; examples provided are selective representation of the ecosystem. it, and made it an meet their financial needs · Financially Secure
essential part of life in the next five years.
and money management. · Health Stressed
18 Financial Innovation Frontiers 2017 | 192/3
50+ CONSUMERS
F
inancial complexity is a fact of life for today’s 50+ Consumers.
FACE UNPRECEDENTED That’s partly because there are so many financial products and services
from which to choose. But that’s actually a symptom of the evolution
FINANCIAL COMPLEXITY
of kitchen-table economics, the meaning of breadwinner, a multigenerational
financial squeeze, the erosion of employment entitlements, and an economic
meltdown that was debilitating for many Americans now approaching
STUDENT DEBT retirement. These factors heighten financial anxiety, but they also create
“
urgent opportunities for financial innovators.
More income earners means more earning
power—and sometimes more risk.”
HEALTHCARE COSTS
In their lifetimes, 50+ Consumers have seen the story of U.S. households play
! WEAK
ECONOMY
out on their television screens. The single-earner family with a stay-at-home
mom in “Leave It to Beaver” gave way to “Modern Family,” where multiple
generations live under one roof and it takes two (or more) incomes to make
ends meet. This decline in single-earner and increase in two-generation
parent/children households began just after 1980, as many of today’s retirement
generation were launching their families and careers. The norm is one
in which 60% of households were headed by dual-income earners by 2012,
and 60.6 million Americans—nearly 1 in 5—lived in multigenerational
households by 2014.1
Dual-income households provided important economic advantages.
They enabled families to build earning power, buy or rent homes in better school
districts, care for parents and boomerang children, and boost their standards
of living. The downside is that the practice also placed many households at
greater risk if an income-earner steps out of the workforce to care for a child
or parent, or suffers an unexpected health problem, layoff, or divorce. The
drop in income can place dramatic pressure on households to cover day-to-day
expenses, to say nothing of saving to buy homes, college, or retirement.
1
http://www.pewresearch.org/fact-tank/2016/08/11/a-record-60-6-million-americans-
20 live-in-multigenerational-households/ Financial Innovation Frontiers 2017 | 2150+ CONSUMERS FACE HISTORICALLY UNPRECEDENTED FINANCIAL COMPLEXITY
Such setbacks are more common than many Americans fathom. In fact, Today, only 11% of 50+ their predecessors didn’t face. a field that requires both
29% of 50+ Consumers say they have suffered career setbacks such as Consumers who are That begins with accurately comprehensive understanding
approaching traditional assessing their retirement and arcane specialization.
a layoff or wage stagnation, making it the No. 1 obstacle for saving money.
retirement age can count needs and successfully setting Most Americans lack both,
And 21% of 50+ Consumers report that career setbacks caused them to dig on the steady income from aside savings. It requires yet they make decisions
into their retirement savings to make ends meet. Recovering from these stumbles a pension, down from 46% understanding investment themselves either out of
is complicated and has put millions of 50+ Consumers behind the necessary of Americans older than 65. strategy, picking a mix choice or a lack of affordable
pace to attain
CONSUMERS financial freedom.
COMMONLY FACED WITH ECONOMIC MISFORTUNE Instead, 44% of consumers of investments that entails professional services. About
approaching retirement an appropriate degree 60% of 50+ Consumers have
THAT AFFECTS SAVINGS
CONSUMERS
CONSUMERS COMMONLY
COMMONLY FACED FACED WITHWITH ECONOMIC
ECONOMIC MISFORTUNE
MISFORTUNE are contributing to 401(k) of investment risk, and not consulted with a financial
THAT
THAT
Career AFFECTS
(such as job lossSAVINGS
AFFECTS
setbacks SAVINGS
or wage stagnation) prevented 29%
plans, double the 20% rate periodically tending the professional of any type
me from saving at the rate I had planned for Americans older than 65. portfolio to keep it on track in the past five years—a list
Career setbacks (such as job loss or wage stagnation) prevented
I had to withdraw a significant portion
meof my saving
savings
atearly in order
I had to
29% Even more ominously: 89% during volatile times. It also that runs the gamut from
from the rate 21%
planned
cover a necessary expense (such as a medical procedure or divorce) of adults nearing retirement poses the challenge of investments to taxes to
I had to withdraw a significant portion of my savings early in order to
Bad investments
cover or a drop(such
a necessary expense in theasstock market
a medical significantly
procedure or divorce)
21% age lack a pension, and 56% understanding tangled tax insurance. And when asked
reduced my savings 19% lack a 401(k). and Social Security rules to whom they trust most to
Bad investments or a drop in the stock market significantly
My investments did better than expected and I reducedearned more
my savings 19% 50+ Consumers without withdraw money in a manner manage their investments,
money on my savings than I had planned 14% a pension must make saving that minimizes the tax bite. 48% look in the mirror and
My investments did better than expected and I earned more
money onormy
I received an inheritance savings thanorI had
endowment, planned
other 14% and investment decisions Personal finance is 21% turn to a close relative.
sum of money outside of my savings 11%
I received an inheritance or endowment, or other
sum of money outside of my savings 11%
I lost some portion of my savings to fraud 2% 50+ CONSUMERS WITH RETIREMENT INCOME
I lost some portion of my savings to fraud 2% 50+ CONSUMERS WITH RETIREMENT INCOME
Other 2% 50+
50-54 CONSUMERS
55-59 60-64 WITH
65-69 RETIREMENT
70-74 75-79 INCOME
80+
50-54 55-59 60-64 65-69 70-74
Pension75-79 80+
401(k) or other employer sponsored plan
Other 2%
0 5% 10% 15% 20% 25% 30% Pension 401(k) or other employer sponsored plan
0 5% 10% 15% 20% 25% 30%
55% 10%
55% 10%
42% 16%
42% 16%
EMPLOYERS FORCE WORKERS TO BECOME DO-IT-YOURSELF INVESTORS 54% 17%
54% 17%
S
The dynamics of saving for 401(k)s theoretically give
retirement have been forever Americans more control over 37% 29%
37% 29%
altered by the decades-long their retirement investments, 24% 39%
move away from employer- their voluntary nature means 24% 39%
funded pension programs that millions of Americans 9% 47%
9% 47%
to self-directed and often often forego saving for
123 2% 45%
self-managed investments retirement in order to pay 2% 45%
such as 401(k)s, IRAs, for immediate expenses
60% 50% 40% 30% 20% 10% 0 10% 20% 30% 40% 50% 60%
and SEPs. Although plans like and spending goals. 60% 50% 40% 30% 20% 10% 0 10% 20% 30% 40% 50% 60%
22 Financial Innovation Frontiers 2017 | 2350+ CONSUMERS FACE HISTORICALLY UNPRECEDENTED FINANCIAL COMPLEXITY
FINANCIAL
FINANCIALADVISOR
ADVISOR USED
USED IN LAST FIVE YEARS (QL7—ALL 50+)
FINANCIALADVISOR
FINANCIAL ADVISORUSEDUSEDININ LAST
INLAST FIVE
LASTFIVE YEARS
YEARS (QL7—ALL
FIVEYEARS (QL7—ALL 50+)
50+) 50+ Consumers Facing Medical
to aEmergencies
less
50+costly
ingeneric
Consumers
50+ Consumers Past drug.
Facing
the Facing
Medical
5 Years of individuals who are less vs. 56%)
Tax preparation Emergencies in the PastMedical
5 Years
Tax preparation
Tax preparation
They think twice
Emergencies inbefore
the Past 5 Years financially secure. · Are more likely to
·
Investments
FINANCIAL
Investments
Investments
Life, home or auto insurance
ADVISOR USED IN LAST FIVE YEARS (QL7—ALL making50+) an appointment to 50+ Consumers Facing Medical acknowledge they must
Life, home or auto insurance
Life, home or /auto insurance see a doctor, 47M
head
47M to urgent Emergencies in the Past 5 Years make changes to their
Financial planning for long-term saving budgeting
Financial planning for long-term saving / budgeting
Financial planning for long-term savinginsurance
/ budgeting
Tax preparation 47M
care, rush to an emergency finances in the coming
Medical Investments
Medical insurance
Medicalplanning
None / Have not sought financial insurance
Life, home or auto insurance room, or dial 9-1-1. And years but say they don’t
None / Have not sought financial planning
None / Have not sought financial planning
Financial planning for long-term saving / budgeting as a new year approaches, 47M know where to start (29%
0 10% 20% 30% 40% 50% 60%
0
0
10%
10%
20% 30%
Medical insurance
20% 30%
40%
40%
50%
50%
60%
60%
many carefully accelerate vs. 17%)
None / Have not sought financial planning or defer medical care to
PERCENTAGE
PERCENTAGE OF 50+ CONSUMERS WITH “MUCH” OR “TOTAL”
PERCENTAGE
PERCENTAGE OFOFOF 50+50+
50+ CONSUMERS
CONSUMERS
CONSUMERS WITH WITH
WITH “MUCH”
“MUCH”
“MUCH” 0 OR OR
OR “TOTAL”
“TOTAL”
10%“TOTAL”
20% 30% 40%
minimize60%their out-of-pocket
50%
Health-Stressed consumers LIFE EXPECTENCY
CONFIDENCE
CONFIDENCE IN PARTIES’ ABILITY TO MANAGE INVESTMENTS expenses and maximize the —nearly half of whom have Improvements in health care
CONFIDENCEININ
CONFIDENCE PARTIES’
INPARTIES’
PARTIES’ABILITY ABILITY
ABILITYTOTO TOMANAGEMANAGE
MANAGEINVESTMENTS INVESTMENTS
INVESTMENTS savings from tax-advantaged suffered a major medical means Americans are living
PERCENTAGE
Yourself
Yourself
OF 50+ CONSUMERS WITH “MUCH” OR “TOTAL”
savings accounts. event in the past five years longer, adding to the need
Yourself
CONFIDENCE
General financial advisor
General financial
General Close
financial
advisor
advisor
IN PARTIES’ ABILITY TO MANAGE INVESTMENTS
This drain on family finances —offer another barometer to plan wisely for serious
relative
Close relative
Close
Professional Stock relative
Broker
and time has made healthcare of risk and need. Compared ailments and possibly
Yourself
Online, algorithm-based wealth
Professional Stock Broker
Professional Stock tool
management Broker
General financial advisor
a divisive national political to 50+ Consumers for whom lengthening the need for
Online, algorithm-based
with little or wealth management
interactiontool
Online, algorithm-based no human
wealth management
with little or no human interaction tool
Close relative
issue. What’s not in question health issues are not a concern, medical care. In 2015,
with little or no human interaction 0
0
10% 20%
10% Professional
30%
20% Stock30% Broker
40%
40%
50%
50%
60%
60% is whether Americans face the Health-Stressed: Americans lived nearly 79
0 10% 20% 30% 40% 50% 60%
Online, algorithm-based wealth management tool a financial risk if they lack · Have saved $20,000 less years,3 an increase of almost
·
with little or no human interaction
sufficient medical coverage for retirement, which nine years since 1960.4
INNOVATOR PROFILE 0 10% 20% 30% 40% 50%
or are not60%
prepared for big represents a retirement At $50,000 per year, that
Financial Engines
Offered through employers, it manages investments and provides financial planning for budgeting, medical bills. Sadly, such events gap of nearly $1 billion adds $450,000 in income
life insurance, estate planning, taxes, health care, and retirement distributions. are commonplace and risky: for the nearly 47 million to support adults in their
*This does not imply endorsement; examples provided are selective representation of the ecosystem. · 41% of 50+ Consumers affected Americans. latter years of life. The
·
faced a major medical · Are less confident they can increase in life expectancy
·
event in the past five years. meet their financial needs also contributes to the
RISING HEALTH CARE COSTS · 18% say they could not in the coming year (59% sandwiching of generations
·
The burden of health care The self-employed or workers 50+ Consumers face rising cover any out-of-pocket vs. 71%) as those approaching or
is growing. The cost of the at small firms generally pay pressure to “shop” more expenses if they experienced · Are less certain they can entering retirement often
·
average family health care higher deductibles and higher wisely for medical care a healthcare emergency— afford to spend without have parents who also need
plan climbed to $18,142 premiums than employees in an industry that lacks price a figure that jumps to 29% worry or scrutiny (45% care or financial support.
in 2016, rising at a rate that of mid-size to large companies.2 transparency. They weigh FORGONE
FORGONE
FORGONE INVESTIBLE
INVESTIBLEASSETS
ASSETSDUE
DUETOTOMEDICAL
MEDICALEMERGENCIES
EMERGENCIES
outpaces both inflation and AARP’s Financial Innovation whether it’s worth the added FORGONEINVESTABLE
INVESTIBLE ASSETS
ASSETS DUE
DUE TO
TO MEDICAL
MEDICAL EMERGENCIES
EMERGENCIES
wage growth. In addition, survey shows that 57% cost of seeing an out-of-network $990B $980B $990B
$960B
FORGONE $980B
INVESTIBLE ASSETS
51% of employees paid of 50+ Consumers saw their doctor. They quiz doctors $940B
$940B $950B
$950B
$960B
$960B $980B DUE TO $990B
MEDICAL E
a deductible of $1,000 or health care costs increase and pharmacists about $940B $950B
more, up from 31% in 2011. in the past year. whether they can switch $960B $980B
2017
2017
2018
2018 $940B 2019
2019 $950B 2020
2020
2021
2021
2017 2018 2019 2020 2021
24 2
2016 Kaiser/HRET Employer Health Benefits study 3
National Center for Health Statistics, https://www.cdc.gov/nchs/products/databriefs/db267.htm Financial Innovation Frontiers 2017 | 25
4
World Bank, http://data.worldbank.org/indicator/SP.DYN.LE00.IN
2017 2018 2019 202050+ CONSUMERS FACE HISTORICALLY UNPRECEDENTED FINANCIAL COMPLEXITY
HEALTH
HEALTH CONCERNS
CONCERNS COME
COME WITHWITH SIGNS
SIGNS to widespread layoffs, turmoil struggling to return to pre- on their savings that are
OF RISING
POORER
OF POORER FINANCIAL
FINANCIAL OUTLOOK
OUTLOOK in the financial markets, recession levels. largely unrealistic in the
and mortgage foreclosures. Interest rates also fell recent market.
I am confident that I can meet my financial needs
COLLEGE over the next five years Many 50+ Consumers are dramatically during the
RISING
$I feelCOSTS still struggling to recover lost financial crisis to stimulate
$
that I have room in my budget to spend money on COLLEGE
things I engjoy without too much worrry or scrutiny retirement savings and the economy and boost
$ COSTS
$
learning the hard way that the collapsed housing market.
I know that I will need to make changes to my finances
in the coming years but don’t know where to start homes cannot be treated This extended period of low
as piggy banks. While some interest rates caught many 50+
0 10% 20% 30% 40% 50% 60% 70% 80%
regions have experienced Consumers off guard because
recovery, others are still they had anticipated earnings
OTHER SOURCES OF DEBT
WEAK
more adults 50+ are ECONOMY
incurring loans are paying on behalf WEAK
INNOVATOR PROFILE ECONOMY
RISING
student loan debt on their of other family members, Genivity
own behalf. nearly double the 37% rate A client-facing platform that incorporates family health information to enable financial advisers to consult
COLLEGE Overall, just 7% of older for those who are 50 to 54. with clients about hereditary and lifestyle-based health risks and estate planning. Also provides storage
$ COSTS consumers carry student loan
for health records, insurance, advance directives, and wills.
$
PayActiv
debt, but the proportion An employee benefit that enables employees to access up to $500 of the income they have earned
is double, at 14%, among before payday, for a flat fee up to $5.
adults who are 50 to 54. *This does not imply endorsement; examples provided are selective representation of the ecosystem.
This segment is the most likely
STUDENT LOAN DEBT to take on student loan debt
Rising college costs compound in the next five years: 13%,
student loan burden. Loan more than double the 5% KEY T A KEA W A Y S
debt originates from a variety rate among 50+ WEAK Consumers • Today’s • The shift from • The financial • Many 50+ • The Great
ECONOMY
of sources, but one of the most overall. The debt represents households employer- burden of health Consumers Recession
unique aspects of student a combination of loans for have more funded care is growing, are confronting continues to
income pensions to forcing 50+ multi- hobble many
loan debt is the multi- children, grandchildren, and WEAK ECONOMY earners and self-directed Consumers generational 50+ Consumers
generational sandwiching even their own college bills. The Great Recession continues more earning retirement to “shop” more student loan because it
of expenses that can make Still others act as a cosigner to hamper many 50+ power plans has wisely in an debt that eroded their
it difficult for 50+ Consumers for family members. Consumers. The U.S. economy —but that can forced 50+ industry that is making it retirement
to save effectively for Financially Secure consumers has recently emerged from subject them Consumers to lacks price difficult to save savings, home
to greater become transparency for retirement. values, and
retirement. Career setbacks are the most likely to take on one of the longest and deepest financial risk do-it-yourself and bill net worth.
and the need to extend working debt for younger generations. recessions since the end if they aren’t investors. confusion.
years to build savings and Overall, 77% of the Financially of World War II. Beginning prepared for
make ends meet mean that Secure who owe student in 2007, the downturn led a setback.
26 Financial Innovation Frontiers 2017 | 2750+ CONSUMERS FACE HISTORICALLY UNPRECEDENTED FINANCIAL COMPLEXITY
KEY AREAS WHERE FINANCIAL INNOVATORS CAN HELP Emphasize digital tools that MINE DATA FOR ONE-TO- basis. Such updates initially
enable patients to understand ONE INSIGHTS AND ADVICE will add value to traditional,
MAKE MANY CHANNELS or fire up a chat or video should never have to ask, their payment options and Providing a personalized transaction-centric quarterly
WORK AS ONE session. At no stage, should “Why won’t you let me have the limits of their insurance experience requires critical or monthly statements
No single channel is always consumers have to start over. my money now?” plans. Empower patients advances in the ability by incorporating personal
best. Consumers want to “shop” more wisely for to collect accurate customer details, goal-based background,
to choose the touchpoint— SATISFY REAL-TIME TAILOR PRODUCTS medical care and prescriptions data, mine it, and apply and unique insights in
or a blend of touchpoints— EXPECTATIONS AND SERVICES TO FIX by shedding light on opaque predictive analytics and artificial narrative sections and graphics.
that makes sense for a given Consumers know that bits HIGH-PRIORITY NEEDS pricing. And manage the thicket intelligence. High-quality Before long, however,
interaction at a given time. and bytes travel faster than Financial innovators can of out-of-pocket costs and data is critical, for example, they will set the stage for
In the case of, for example, the eye can blink, reinforcing influence what customers co-payments, the higher price to initiate meaningful conversational, voice-driven
account opening, the best their sense that digital spend, save, borrow, insure, tags of out-of-network care, “conversations” with interaction that can
experience could start with transactions should be and invest. Take particular and the bills and refunds that customers and the success be informative, soothing,
researching products online instantaneous. Account aim at the three areas of great land in a patient’s mailbox of account aggregation, and educational.
but applying on a mobile balances should update need: 1) preparing for months after their medical care. spending categorization,
device. An online applicant as soon as consumers walk financial shocks, 2) coping financial alerts, financial
might prefer to scan
documents and track
away from the checkout
stand, count cash from
with ongoing healthcare
costs, and 3) saving for
HELP INVESTORS TAKE
THE RIGHT AMOUNT OF RISK
fitness features, gamification
and graphic insights, and “alt i
i
an application’s progress with an ATM, or execute a stock retirement. Refashion tools The investment industry is lending” credit analysis.
a smartphone. And if an trade. An adviser should for consumers whose sense
applicant wants advice, he
or she could chose to visit a
have immediate access of urgency is amplified.
continually seeking better ways
to assess a client’s tolerance $$$
DEVELOP “ROBO WRITING”
to information a customer for investment risk. It not only TO REDEFINE STATEMENTS
branch, phone a call center, provides. And consumers
$$$ is essential to recommend
appropriate investments and
AND ON-DEMAND UPDATES
Draw on a customer’s
asset allocations, but it also structured data to create unique
!
STRAIGHT-THROUGH DIGITAL SUCCESS is a powerful opportunity summaries and insights
to inform, advise and in real time, with every login
REMAINS ELUSIVE or alert, on a one-to-one
establish trust.
Checking Account Applications Completed in a Single Channel
!INNOVATOR PROFILE
65% 34% 8% PRESCRIBE BETTER Abaris Abaris
A direct-to-consumer marketplace for retirement annuities from insurers such as AIG, Pacific Life,
BRANCH ONLINE MOBILE WAYS TO MANAGE HEALTH
Guardian, Principal Financial Group, and Lincoln Financial Group.
CARE COSTS Ellevest
Anticipating and managing An investment advisory firm that targets female investors, saying it is the first “gender-aware robo
completed in completed in completed in
18% another channel 45% another channel 67% another channel health care bills is an adviser.” Rather than set allocations based on measures of risk tolerance, Ellevest sets risk based
used another channel, used another channel, used another channel, increasingly crucial aspect on factors such as an investor’s goals and a woman’s longer life expectancy.
17% completed in branch 21% completed online 25% completed in
mobile channel of their financial safety net. *This does not imply endorsement; examples provided are selective representation of the ecosystem.
28 Financial Innovation Frontiers 2017 | 293/3
50+ CONSUMERS ARE
?
HEALTHCARE
OFTEN ILL-PREPARED
? T
here’s a dangerous disconnect in American thinking. On the one hand,
HEALTHCARE AARP’s 2017 Financial Innovation Frontiers study provides ample
(YET THEY DON’T ACT
evidence that millions of 50+ Consumers rely on a frayed financial safety
net, and many say they are uncertain how to improve their odds for
achieving financial well-being. On the other hand, the typical 50+ Consumer
??
THAT WAY)
FINANCIAL FITNESS RETIREMENT
handles his or her own financial planning and seldom seeks comprehensive
HEALTHCARE professional services. $ $
That’s not always a matter of choice, of course. The financial services
HEALTHCARE industry historically has catered primarily to affluent consumers because
FINANCIAL FITNESS RETIREMENT
$ $
it hasn’t found a way to advise less-affluent Americans profitably. That’s why
digital innovation is critical if the industry is to expand financial services
$ $
to a broader audience in a sustainably profitable way.
In particular, there are warning signs that many 50+ Consumers are
financially exposed and ill-prepared in three critical areas:
?
FITNESS
FINANCIAL $
FITNESS $ RETIREMENT
RETIREMENT
?
$ $$ $
?
$ $ Financial Healthcare Retirement
$ Fitness Emergencies Readiness
?
?
?
“I know that I will need to make “I know what steps I need to take
?
changes to my finances in the coming to ensure my financial health over
years, but I do not know where the long term, including budget
?
to start” and insurance needs”
All 50+
67% Consumers 23%
Financially
80% Secure 13%
Overextended but
67% Digitally Engaged 28%
65% Health-Stressed 29%
80% 70% 60% 50% 40% 30% 20% 10% 0 0 10% 20% 30%
30 Financial Innovation Frontiers 2017 | 3150+ CONSUMERS ARE OFTEN ILL-PREPARED (YET THEY DON’T ACT THAT WAY)
1. FINANCIAL FITNESS 2. HEALTHCARE EMERGENCIES
Unexpected financial events to 35% of the Health-Stressed. lack any savings to cover The cost of health care seems Per-capita spending on health the lifestyle they desire, health
can come from many About 10% of the emergency needs. to ride only the “up” escalator. care rose to $9,523 in was a recurring factor,
directions. Some can be Overextended but Digitally The combination of job strains Employers are paring back 20147—more than $5,770 with 61% citing the need
life-changing, like a job loss Engaged fear that they will and healthcare can sometimes health plans, forcing workers more than the average 50+ to maintain their own health,
or a medical emergency. be unable to repay their loans, be the one-two punch that to pay increasing out-of-pocket Consumer estimates he and 31% grappling with
But for many 50+ Consumers putting an estimated $540 knocks out both the safety bills. The rise in high-deductible or she can comfortably spend a family member’s health.
setbacks can be as mundane billion in loans at risk in net and retirement savings. plans puts more families without placing their Among the Health-Stressed,
and commonplace as a car 2021. Similarly, 41% of 50+ A quarter of the Health-Stressed at risk of paying thousands financial security at risk. these concerns spike sharply,
or home repair. Whatever Consumer households dug into their retirement of dollars in medical bills Health concerns weigh with nearly 9 in 10 citing his/
the cause, the risk of a experienced a healthcare savings to cope with a job before their insurance kicks heavily with 50+ Consumers. her own health and more
financial spiral can be scary: emergency. Of course, loss or medical event. in; such plans covered 38% When asked to rank the than half citing a family
Belt-tightening. Mounting the odds that Americans of 50+ Consumers in 2015.6 top concerns that will affect member’s health.
credit card debt. Skidding will need medical care rises HOW STRONG
All 50+ consumers 50-54 55-59 60-64 65-69 70-74 75-79 80+
credit scores. The inability with age. In 2014, the CDC IS YOUR SAFETY NET? 80%
to refinance or consolidate estimated that more than More than 40% of 50+ 69%
60% 68%
loans. In the worst cases, 40% of Americans over 55 Consumers says they 61% 62% 60% 63%
55% 57%
52% 52% 53% 51%
the spiral ends in bankruptcy were in fair to poor health.5 or a partner suffered a major 40% 44% 46% 43%
37% 35%
and foreclosure. Yet on average AARP medical event such as an 20%
34% 31% 30% 30% 28% 31%
22%
In the past five years, 29% estimates that even a bill operation or an emergency
0
of 50+ Consumer households of $3,750 could jeopardize room visit in the past five MAINTAIN MY HEALTH IMPROVE MY HEALTH MANAGE A FAMILY MEMBER'S HEALTH
0
suffered a career setback such the typical household’s years. They typically estimate
as job loss or wage stagnation financial security. Some they can pay only $3,750 20%
31% 32% 32%
that prevented them from consumers do not have for a medical emergency 40% 45%
53% 57% 55% 54%
saving as much as they had a safety net at all: Nearly without jeopardizing their 60%
61%
66%
planned, a figure that rises one in five 50+ Consumers financial security.
80% 86%
91%
All 50+ consumers Financially Secure Overextended but Digitally Engaged Health-Stressed
INNOVATOR PROFILE
AboutLife
Free personal finance and retirement planning tools such as a “retirement age predictor,” plus
the option to consult financial advisers. Acquired by NerdWallet in 2016. INNOVATOR PROFILE
ProActive $1,750 BillShark
Links to customers’ accounts to put aside money to pay loans “when you NOTcanFINANCIALLY
afford it,” SECURE
then makes Negotiates on behalf of consumers and small businesses to lower a range of bills, including cable
loan payments automatically. TV, Internet, wireless service and electricity bills.
Propel $3,750 Earnup
OVEREXTENDED BUT
The free FreshEBT app enables recipients to monitor electronic benefit transactions, food stamp
DIGITALLY ENGAGED Links to customers’ accounts to put aside money to pay loans “when you can afford it,” then makes
and welfare balances, anticipate deposits, and find stores that accept EBT payments. loan payments automatically.
$3,750
*This does not imply endorsement; examples provided are selective representation of the ecosystem. *This does not imply endorsement; examples provided are selective representation of the ecosystem.
HEALTH-STRESSED
32 5
$17,500
https://www.cdc.gov/nchs/data/hus/hus15.pdf#045 or https://www.cdc.gov/nchs/data/hus/hus15.pdf#045 6
7
AHIP, https://www.ahip.org/wp-content/uploads/2015/11/HSA_Report.pdf
The Center for Disease Control, https://www.cdc.gov/nchs/fastats/health-expenditures.htm
Financial Innovation Frontiers 2017 | 33
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