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A new model of consumer engagement - A US perspective

“If people can visualise their futures it improves their propensity to save.”

The demographic make-up of the United States has seismically shifted over the past century. In the 1940s, a person could expect to live until 65-67. By today’s standards, life expectancy for someone aged 65 is approaching 85-87 – an extra two decades accrued in a relatively short amount of time. Surya Kolluri, Head of Thought Leadership at Bank of America’s Retirement and Personal Wealth Solutions business, notes how society thinks of this as a ‘longevity bonus’, but that bonus is not necessarily coming post-retirement. “What we are witnessing is that people are changing their working patterns. They’re taking that longevity bonus throughout their working lives through sabbaticals, career breaks and job changes. The baby-boomer generation is redefining retirement as a life stage of renewal. They are exploring new opportunities and thinking about retirement in an entirely new manner. 80%of baby boomers reaching retirement age have expressed an interest in continuing to work.”

Accordingly, Bank of America has identified three pillars to help frame the context of an ageing society, and how society can adapt to this new face of older living. The first of these pillars is built on the concept of Longevity Economics, which attempts to understand the positive economic contribution of the ageing population. In the US, 10,000 people turn 65 every day. “This age group possess enormous assets – around $7tn in the US or $15tn globally. It is this consumer power which is underpinning the growth of the Silver Economy, with companies investing in longevity.”

Bank of America’s second pillar is about helping families to manage the financial puzzle pieces. “This means ensuring that the life span matches the health span which matches the wealth span. This encapsulates remaining active and maintaining positive nutrition and sleep patterns, as well as taking care of wealth goals, such as budgeting and planning for long-term care.” The bank has created several tools to help people make sense of these puzzle pieces, including a series of studies on Life Stages including a longevity checklist to discuss with advisers at each life stage, and a family financial album which enables people to keep all of the key financial documents – savings, pensions, insurance policies and wills – in one place.

It is this holistic offering that will prove vitally important, Kolluri argues. “We need better money habits across all generations. Rates of financial literacy are quite low. We need a new model of consumer engagement spanning advice, information and education. I believe that new technology will play a vital role in creating that. But we can’t create the step-change in behaviour with education alone. We need to explore behavioural economics: getting behaviour change involves more than going to a class. If people can visualise their futures it improves their propensity to save.”

The third pillar focuses attention on how the bank can help prevent elder financial abuse and manage cognitive decline – the former of which has been strongly under the lens of both financial regulators in the US, as well as Congress.

According to FINRA in the US, an estimated $50 billion is lost to financial fraud every year, and that number doesn’t even account for potentially significant indirect costs, including legal fees, late fees, bounced checks and lost wages. The cost of fraud across all age groups is high,” Kolluri explains. “The elderly are particularly vulnerable. In addition, 70% need long-term care but only 20% purchase it. $7,000 is spent by children helping their parents.”

This upward flow of inter-generational wealth transfers currently underpin the ageing population, Kolluri states, but is all too aware of how unsustainable this approach may prove. “The Center for Disease Control has likened the growing impact of Alzheimer’s to that of a tsunami. We are facing a future in which two in three people will be giving or receiving care.

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Surya Kolluri

Managing Director, Bank of America