Financial Service Providers Neglect Over 50s

The over 50s represent over a third of the population in the UK, and are the most affluent consumer group in terms of income and wealth. However, a new report from Datamonitor suggests that many financial services providers ignore changes among senior customers and often take them for granted.

UK wealth is becoming increasingly concentrated among the older age groups, making them an essential target for financial providers. Both the number of high net worth individuals aged 56+ (defined as those with more than £200,000 in liquid assets), and the extent of their fortune has risen significantly. In 2003 there were over 522,000 high net worth people aged 56+, accounting for almost 70% of the UK high net worth population and owning 68% of high net worth liquid assets (£215 billion).

While the over 50s segment is a growing market, financial services providers are doing little to develop a product offering that is particularly tailored to the needs of this market. Within the various types of financial product, lending products have a lower penetration amongst the over 50s. For instance, MORI Financial Services (MFS) data shows penetration of consumer credit products among the over 50s amounted to 14% in 2003.Conversely, the over 50s are more likely to hold savings and investment products, a trend that can be attributed to the fact that this age group is typically more wealthy than the average population.

Those aged above 65 greatly value a strong customer relationship with providers. The MFS survey shows that these segments typically choose financial services providers not on the basis of product performance, but on the basis of the trust that they have in that player. On the other hand, those aged between 50 and 64 are more demanding and give more importance to product performance and sophistication when choosing a provider. 'In targeting the over 50s providers need to consider each of their financial products separately and come up with an attractive offer that will suit the needs of each of the sub-groups within this customer segment as the over 50s are far from being homogeneous', comments Karina Purang, Financial Services Analyst at Datamonitor.

Savings and investments are where the biggest opportunities lie, since senior customers hold a significant amount of wealth. Product redesign, developing a fuller product mix, offering a first class quality of service and adopting a pro-active and tailored marketing approach will be crucial in acquiring and retaining customers in this product sector.

Household insurance is also among the most popular products for the over 50s. The majority of providers targeting the over 50s differentiate their products based on price. However, Datamonitor believes that targeting the over 50s through various age bands is not necessarily the right answer, and recommends that providers should segment their senior customer base by household income band instead. 'Affluent customers generally have greater household insurance needs than those in lower income bands, simply because they tend to own more property assets', says Purang. 'In addition, many more over 50s own a property abroad than before. Their love of overseas holidays and financial affordability are among the factors that are driving the market. These customers hence represent a good opportunity for providers to differentiate their household insurance products'.

One of the biggest challenges for marketers is to communicate the right message to the over 50s. This is mainly because the over 50s do not feel their age and their needs and attitudes keep on changing. Datamonitor advises financial services providers to concentrate their efforts in targeting attitudes not age groups. 'Seniors have gone through a number of life events and life stages before reaching the crucial age of 50. Experiences differ, so do needs and behaviours,' comments Purang.

Datamonitor can be found at www.datamonitor.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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