Well that’s what Oliver Wyman is telling insurers with workplace pension books to aspire to be.
I haven’t seen this phrase in any IGC report but it does it for me. I well remember meetings when I was at Zurich 15 years ago when we came to the same conclusion as Oliver Wyman – “DC is a mugs game unless you can increase the lifetime ownership of the client” (we may not have used quite these words).
Here’s what a Financial Home might look like; (words courtesy of the excellent Corporate Adviser)
The report argues that over the longer term, insurers will derive revenues from multiple sources, including general insurance, banking services, and increased involvement in non-financial expenditure such as recreation, energy, long term care residence, power of attorney and funeral planning. They will also increase the revenue they earn from existing business lines, such as equity release. The client’s lifestyle and financial profile provides a strong base for continuously developing and enhancing products and services
All of which begs two questions…
- Will people choose to stay with the insurers
- Can insurers convert to being “financial homes”.
Both are big challenges. I am 56 and I am seriously unimpressed by the User Experience at my insurer. Am I close to thinking of L&G as a Financial Home? No! Are there better alternatives – probably!
Here are the Office of National Statistics 2016 population stats (by age). The colour coding is mine – as you get greener – you get more profitable.
You don’t have to be a genius to see that the much talked about intergenerational subsidies apply. The green people subsidise the pink people and if all the green people bugger off elsewhere, then the whole tower of people above them is liable to collapse.
So keeping green people like me happy , is kind of important to insurance companies.
So where could I go?
It may have escaped your notice, but if Royal Mail presses ahead with its CDC plan, all 43,000 Posties contributing handsomely to the Zurich run Royal Mail DC plan will be saving into a new CDC plan. Small wonder that the ABI is not a member of the Friends of CDC. If you work for someone who decides to jack in an insured DC plan and upgrade to CDC, you will have a pre-prepared financial home – and it won’t be with an insurer!
On the other hand, you may decide you want the superior customer experience of a Hargreaves Lansdown or a Pensions Bee where you can manage your retirement income on a smart phone. The last time I looked the Service Level for my getting a payment from my workplace pension is 10 working days – that’s not quite so smart.
If you have a reasonable amount of money in pensions and you want a Financial Home for the rest of your days, it is reasonable to suppose you will go house-hunting as you get into the dark green box (above).
The problem for the insurers is not just that workplace pensions are unprofitable, it’s that everything else is very profitable indeed. Not just your competitor’s product but all the product lines that don’t sit on the workplace pension platform.
To “re-platform” workplace pensions is an expensive business. My lot are still using the Platform Eagle Star sold them back in the nineties. There’s a lot of lipstick on the pig- but it’s still a pig.
Sadly that means that meaty DC customers like me are likely to be offski to a fancy drawdown environment, as I get with Pension Bee with virtually no overhead and the prospect of big fat price reductions over time (in your dreams Henry- love Romi). If I don’t migrate to the Bee Hive, I might cash in my chips and transfer to a CDC plan in return for a wage for life – not as flexible but a very comfy financial home.
Will the insurers get their acts together? Well one or two are getting there, Vitality, LV and Just do look like they’re ready for the 21st century and showing that insurance can be relevant to millennials as much as my generation. But they are not in the savings game and they can build not to defend books but to capture the money of the workplace providers.
When I look at the slide below, I have to ask myself, how many of these logos will be preoccupying me in years to come. I suspect that none will provide me with my Retirement Home.