On the 21st September 2017, the FCA published its Occasional Paper 31: Ageing Population and Financial Services (OP31). The paper highlights the findings from the Ageing Population project and explores how the ageing population will impact the financial services industry.
The Ageing Population project was originally launched by the FCA in February 2016 to explore how older people use financial services and products. The FCA proposes to publish an overarching strategy; ‘Approach to Consumers’, later this autumn.
Linda Woodall, Director of Life Insurance and Financial Advice at the FCA, said:
“We hope that today’s paper will help drive further positive innovation in the interests of older consumers. Our findings highlight the extensive public policy challenge requiring action from firms, government, regulators and other parties to bring about improvements for older consumers who use financial services.”
Key Points from OP31
The FCA states that whilst older consumers are not necessarily vulnerable, they are more likely than other groups to experience vulnerability (whether temporary or permanent). This is particularly the case for those aged over 75. In line with the aims of the FCA’s Mission, this paper focused on the areas where regulation and financial services firms can have the most significant effect.
The paper concludes that there is scope for financial services firms to do more. The FCA has set out some ideas for firms to consider (each of which will need to be considered in conjunction with their specific business models), such as:
- Looking at product and service design
- Assessing customer support mechanisms
- Reviewing and adapting strategies
The FCA found that there are risks that the financial services needs of older people are not being consistently met, which can result in exclusion, poor customer outcomes and potential harm. The issues appear to be driven by a range of interrelated causes, which include:
- Policies and controls that are not designed around consumer needs
- Unintended consequences of product and service design
The FCA explicitly calls out the areas they feel firms and regulation can be used to the greatest effect:
- Retail banking – where many common issues arise for older consumers
- Third party access – tackling issues ranging from power of attorney to the remembering of passwords / security questions
- Later life lending – ensuring appropriate understanding and access for older consumers
- Long-term care – how the financial services markets respond to the financial challenges of obtaining long-term care
The FCA acknowledges that these issues will require action from multiple parties in order to be suitably addressed. In many cases, solutions do not lie within the remit of any one party – including the FCA or the regulated firms that it supervises.
The FCA has several other workstreams that are relevant to older consumers. This includes its ongoing work on pensions, advice and guidance, scams and fraud.
Regulatory Next Steps
The FCA would like firms and individuals to contact them if they wish to discuss the issues raised in this paper by 21 November 2017 and to feed back into the consultation process. The FCA anticipates a further review in three to five years of how the financial services industry is adapting to meet the needs of older consumers and will review practices on a pro-active basis as part of the firm supervision model.
What this means for firms
In relation to the four issues identified, the FCA has set out what it considers to be best practice for each area. Firms should use this opportunity to consider how they internally align to best practice. Occasional Papers act as a good litmus test of the regulator’s mindset and thinking.
Firms should try to be on the front foot in relation to how they embed some of the good practice findings within the paper, possibly using thematic reviews and compliance monitoring activity as internal barometers. Firms should also consider reviewing the existing policies and controls in place to test whether they remain fit for purpose.
Ultimately, the regulator has acknowledged that the issues identified are complex, multi-faceted and will require action from multiple parties. There is also a strong overlap with the FCA’s continued focus on customers in vulnerable circumstances, which was driven by Occasional Paper 8.
The FCA has also stated that it envisages working with both the government and other interested parties to find practical solutions to some of the issues identified.