Baby Boomer banking needs are becoming more complex as members of the generation balance their own retirement and financial planning with increased responsibility for aging parents and other family members. While much of the financial services industry’s attention has focused on attracting younger consumers, Baby Boomers represent an important market whose changing circumstances may require a different approach from banks and other financial institutions.
Longer working lives, evolving family responsibilities, healthcare concerns, and multigenerational financial obligations are creating challenges that traditional banking products were not necessarily designed to address. Financial institutions have an opportunity to develop products and services that make it easier for Boomers to manage both their own finances and those of family members who increasingly depend on their assistance.
For those of you who don’t follow Ron Shevlin in Forbes, the self-proclaimed “Fintech Snark”, he’s a good read. Today’s post, The Next Generation Of Banking Consumers Are Baby Boomers (Not Gen Z) is more personal than usual. Mr. Shevlin points to the need for financial institutions to address the financial needs of Baby Boomers, such as their obligation to take on the financial management duties for their parents and grandparents.
Ultimately, he contends, banks have to develop a new set of products and services that meet the needs of the Baby Boomers, who have an increasingly complex relationship with banks. As he points out:
There are a number of trends that make today’s Boomers situation different than that of the members of the preceding generation:
1) Lifestyle. As MarketWatch put it, “working has become the new retirement.” According to a LIMRA Secure Retirement Institute survey, 27% of pre-retirees plan to work part-time during retirement, and roughly one in five current retirees are working part-time. Why? For spending money, because they enjoy their work, and to stay intellectually engaged.
2) Family dynamics. Financial accounts are typically designed for individuals, often providing “joint” access for a significant other. Boomers’ financial realities are far different. Many Boomers help their aging parents manage their finances, and for all the talk about how student loans are affecting Millennials, Boomers’ average student loan debt was higher than it was for Millennials in Q1 2019.
3) Healthcare. Transamerica’s annual study on retirement reveals increasing healthcare concerns. Between 2015 and 2017, concerns about: 1) declining health that requires long-term care grew from 36% to 44%; 2) lack of access to adequate and affordable healthcare rose from 25% to 38%; and 3) cognitive decline, dementia, Alzheimer’s increased from 26% to 35%.
The point he makes about taking care of the “Greatest Generation” as they move into their eighties and nineties is a real burden for many Americans – and currently, financial institutions are not making it easy.
As someone with a parent, and in-laws “of a particular age”, I can attest to the need for banks and other financial institutions to step up and address the changing needs of the market. For what it’s worth, the healthcare industry needs to step up, too.
Thanks Snark.
Addressing Baby Boomer banking needs will require financial institutions to reconsider products designed primarily around individual or traditional joint-account relationships. Consumers who are simultaneously managing retirement, healthcare expenses, debt, and the finances of aging parents may need greater flexibility and more sophisticated tools for handling these responsibilities.
The opportunity extends beyond simply serving an aging demographic. Banks that recognize the increasingly complex financial relationships within families can develop services that make financial management easier across generations. As Baby Boomers move into a new stage of their financial lives, institutions that respond to these changing needs could build stronger and more valuable customer relationships.
Overview by Peter Reville, Director, Primary Data Services at Mercator Advisory Group