The impact of delayed milestones
Life moves fast. The pace of change seems to be ever ramping up, and technology that might have seemed ambitious for a sci-fi movie a decade ago is now deemed utterly unremarkable.
But at the same time, life progression is taking longer. With key life goals now typically happening later in life, financial planning norms are being upended. While this offers real challenges for reliable planning, it does also provide opportunities for advisers to prove their worth and develop relationships with the next generation.
Arrested financial development
Our 20th annual Retirement Report highlighted the monumental shift in the UK over the past two decades. Average house prices came in at £123,815 compared to £285,000 today - that’s a staggering 130% increase*. The rental market has seen an even bigger change. The average annual rental property cost just £2,889 in 2005 but is now £14,676 - a five-fold increase**.
Perhaps it should therefore come as little surprise that we are firmly in the era of ‘arrested financial development’.
Due to a combination of financial restrictions and social norms shifting, those key life milestones, that advisers and savers used to be able to set their watches to, are getting later and more sporadic. For example, the average age of first time buyers is now 33 yrs 8 months (in London it’s three years older)1; for those that decide to get married, the average age is now above thirty2, and the average age that women are having their first child is now just shy of 29 years old.
From a career perspective, people’s earning peak is also happening later in life.
Earning more, later conversely means that the imperative to save earlier has in fact risen, because the amount of time that people are earning their ‘peak’ salary may well be shorter too. It also increases the likelihood that those entering later-life and retirement are carrying debt - mortgages for example, the repayment of which would need to be sufficiently mitigated in pension planning.
That’s an awful lot of change to understand and navigate.
Helping families ease the burden
The good news is that financial service providers are only too aware of these shifting milestones. And new products continue to be developed with the aim of meeting the changing needs and expectations of these generations.
The situation is also changing the role of older generations when it comes to the types of support that they offer.
The ‘bank of mum and dad', or even ‘gran and grandad’ remain hugely important. This is true not just when it comes to those bigger set-piece purchases such as getting on the housing ladder - almost a third of grandparents have either lent or gifted money to their grandchildren3. But they are also pitching in for escalating private school fees, school trips, and even pocket money - one in ten parents (10%) say that grandparents have paid for their child’s school trip4.
The income regularity and certainty provided by an annuity can also play a core role in enabling that less ‘big ticket’ financial support.
Another often overlooked element are the developments in protection product space. With milestones delayed, so too are often the more typical purchase points of protection products. And even when those points arrive, these younger generations can struggle to see the value when their day to day finances are often already stretched.
With products increasingly available that allow a third party premium payer on a policy, older generation family members can share the financial burden and give support in this area too.
A generational opportunity
Naturally there’s a critical role for advisers to play in helping people understand where they are in their own financial journey and how to ensure they’re able to meet their milestones with confidence.
Firstly, by having conversations early about what each individual’s milestones look like, what suitable support can be put in place, and then putting that plan into action.
Furthermore, by encouraging and enabling intergenerational support, highlighting the need and opportunity for support upwards and downwards, advisers can help foster loyalty not just in their clients but their children and grandchildren too.
* Source: HM Land Registry https://www.gov.uk/government/news/uk-house-price-index-for-january-2024
** Source: https://www.ukhouseingreview.org.uk/ukhr24/compentium.html
1Source: Mojo Mortgage https://theintermediary.co.uk/2024/06/the-national-average-age-of-a-first-time-buyer-revealed/
2Source: https://www.google.com/url?q=https://blog.ons.gov.uk/2019/04/01/married-by-30-youre-now-in-the-minority/&sa=D&source=docs&ust=1732021693718617&usg=AOvVaw0q60jWCtLHpBvYjxxzpKUQ
3Source: Saga https://www.independent.co.uk/news/uk/home-news/money-savings-finance-millenials-grandparents-b2369117.html
4Source: Zurich Municipal https://guernseypress.com/news/uk-news/2024/06/27/23-of-parents-have-had-to-make-cutbacks-to-fund-school-trips/