I was looking at Titian’s famous Three Ages of Man painting recently and it seemed just as intriguing and compelling today as I imagine it did when he finished it six centuries ago. It got me thinking about those three ages and what they might look like in the 21st century.
In spite of all the societal challenges, I would suggest the first age, say, from one to 18, is pretty good for most children in the developed world. It is about playing, learning and having fun. No dependents, no responsibilities, no serious money worries. Making new friends, enjoying new experiences. Parents taking care of almost everything. Life is simple.
Of course, at this time, most do not recognise the absence of the strains and pressures experienced by grown-ups, as they are wrestling with their own physical and emotional growing pains.
Further education and first jobs signal the ending of the first age. But, for an increasing number of early second-agers, parents still provide emotional and financial support. Sometimes this includes providing food and a roof over their heads.
In the meantime: sex, drugs and rock and roll. Maybe not all, or maybe none. Whatever. As time goes by, reality strikes and the second age begins in earnest for everybody. And what a struggle it can be financially, emotionally and intellectually.
As far as finance is concerned, university tuition fees loom large on the horizon for many and credit card bills mount up with astonishing speed. Interestingly, both are relatively new problems. That said, finding somewhere affordable to live has always been stressful and saving money virtually impossible, even as salaries increase. Thank goodness for automatic enrolment.
But it is not just about money. Having lived life as dependents, second-agers now have dependents. Juggling careers and looking after children is extraordinarily stressful and difficult choices have to be made.
Having been looked after by their parents when in first age, second- agers may now find themselves also looking after those parents, due to their failing mental or physical health. On top of this, work is now far from nine to five, with millions dealing with such issues on mobile devices during evenings, weekends and holidays. It is like running on a treadmill without a stop button.
In the 20th century, there was a stop button. It was labelled “retirement”. The second age for most men ended exactly on their 65th birthday. They could then look forward to about 10 years of leisure, often with a guaranteed pension from their employer.
Nowadays, things are much more complicated. Longevity improvements have doubled the time to the end of the third age, while pension freedoms and other developments enable the wealthy to start it at 55 with a plethora of options available and a need to plan for the next 30 or 40 years.
I guess the starting point for the plan is sorting out pensions and other investments, which is a fundamental role for a financial adviser. But there are a great many other issues that need to be addressed. For example, some third-agers may be looking to start a business and will be after finance; others may have decided they want to move abroad and just soak up the sun. Whatever the circumstances and objectives, advisers are well equipped to support.
Another key role for the adviser is around insurance. People entering the third age will need help in getting this right. The client’s company private health plan will have gone and a new one might be required. The same goes for the death in service life cover.
All this must also be organised around inheritance tax planning, wills, lasting power of attorneys and so on. To repeat: things are much more complicated.
Third-agers are likely to be the segment that is most attractive to scammers, and I think advisers are in a great position to coach clients in this space. Sometimes when people talk about the value of ongoing service fees, I suggest the coaching that takes place has probably saved clients many millions of pounds.
Keeping third agers safe and advising them on all these other issues at retirement is a hugely valuable service implicit in most adviser propositions. Why has no one yet made it explicit and exclusive, packaged it and promoted it powerfully?
The market is huge, with more than £1trn of investable assets in the hands of third-agers and about £500bn of defined contribution pension funds on their way into this space over the next decade.
What is more, Royal London’s director of policy Steve Webb recently estimated the potential for defined benefit to DC transfers could involve additional fund values totalling around £750bn.
These numbers are breathtaking. The opportunity clear. So why is there no strong consumer brand in this space? Is it just a question of time? Or is it that the regulatory environment is such that investing to create a third age advisory business proposition and a national brand carries too much risk?
It is just a question of time. The winner is likely to be an organisation with an existing footprint in this space and with access to the substantial funding necessary to get such a business off the ground.
The proposition would be much broader than the traditional model and will involve multiple channels, including face to face and online. I suspect the funding will come from an existing, relevant consumer brand which already resonates positively with wealthy third-agers.
Malcolm Kerr is senior adviser at EY