Merlyn Holkar, Research Officer, Money and Mental Health

A finance industry that works for older people can help us all

Last week the FCA, the financial regulator, published the results of a major study into the ageing population. People today are living longer than ever before, and it’s estimated that by 2050 one in four of us will be 65 or older. The study looked at the implications for financial services, and sketched out what firms might do so that we’re able to get the most out of financial services throughout our later years.

Reading through the study, it’s clear that many of the challenges faced by older people when using financial services are similar, if not exactly the same, as those that people with mental health problems often encounter. So if we can come up with practical solutions to these problems, it’s essential that they are not limited to older consumers, as they could have a much wider impact.

Product and service design - with vulnerable consumers in mind

One of the strongest messages from the FCA’s report is that, if products and services are designed for ‘the average’ consumer – or worse, as if people are perfectly rational decision makers – then it’s likely that they won’t be suitable for some groups. In particular,  people who struggle with complex decision making, those with mental or physical health problems, or those who lead busy lives and don’t have the time to be well-read active consumers are likely to be ill served.

With this in mind, the FCA has challenged firms to build their understanding of what it’s like for older or vulnerable consumers to access their services, and to use this understanding to design products and services that better serve these groups. Firms have undoubtedly improved their treatment of vulnerable consumers in recent years, but we welcome the regulator’s continued emphasis on ‘inclusive design’ and seeing things from struggling consumers’ perspective. It is essential that accessibility and additional support are considered core business, not an add-on or afterthought.

One area of particular focus was cognitive ageing: the natural decline with age of processes such as our memory, powers of reasoning and mental speed. Research shows that financial decision making ability tends to peak in our mid 50s, but that after this we often start to find things harder, particularly complex or unfamiliar tasks. The study suggests a number of practical steps, such as providing customers with a transcript of phone conversations, which could help older consumers to overcome these challenges.

A real strength of this approach is that the solutions will benefit other groups with cognitive problems too. Previous Money and Mental Health research has catalogued the range of cognitive issues that are common symptoms of mental health problems. For instance, people with depression often experience memory problems and a reduced attention span.

A helping hand

Third party access to financial services was another major theme covered by the study. Money and Mental Health research has previously shone a spotlight on this issue, showing that many people with mental health problems are using risky workarounds such as sharing PINs or online banking details, because they need money management support from a carer, but banks’ systems do not readily allow this.

These issues are much the same for older people. The FCA found that 37% of adults aged 85 and over have shared their personal banking details with somebody else, and they judged that “currently, firm processes and systems don’t appear to be optimised for enabling third party access”.

On this issue the FCA has really thrown down the gauntlet, challenging firms to explore completely new ways for consumers to get carers involved with their finances, whilst impressing the importance of strong safeguards against financial abuse. They suggest that technological advances, such as the advent of open banking, could provide new opportunities for enabling third party access.

It’s great to see the regulator’s appetite for innovation in this area. But it’s important that firms consider a range of different support needs when designing new systems. One of the characteristic traits of many mental health problems, unlike most age-related conditions, is that they can fluctuate, so people’s support needs may come and go over time. Given this fluctuation, we recommend that flexible systems for third party access are developed, so that customers can get help from carers when needed, without having to sign away permanent control.

People, not characteristics

This blog highlights two of the ways that older people’s financial services needs can be similar to those of people with mental health problems, but of course the reality is that many older people will also have mental health problems, and that most people with mental health problems today will live to a ripe old age. So firms should make sure they’re thinking about real people, with multiple and often complex needs, rather than focusing too narrowly on certain characteristics such as age or health conditions, when considering customer vulnerability.