Over the past few decades, economic, political and social changes have resulted in the shift of risk management responsibilities from institutions to individuals, a trend we are forecasting to become more acute over the next 10 years.
The biggest driver of this shift is the changing nature of work. Lifetime employment – and the retirement, health care and career planning benefits that once came with it – are no longer the norm. For example, according to the Bureau of Labor Statistics, only 28 percent of Americans, and less than 20 percent of Americans working in private industry, participate in a traditional defined benefit pension plan.
In addition to the decline in corporate benefits, support services from federal, state and local governments are also being reduced due to fiscal problems. The current policy debates in Washington and state capitols are not about whether or not to cut services, but instead how much to cut.
These shifts are resulting in an increased burden of responsibility for both individuals and families in all aspects of personal financial management, including planning and decision making in the areas of education, retirement planning, health care and elder care.
While this shift in responsibility enhances individual choice and can be empowering, it also forces individuals and families to shoulder the burden of managing the risks and complexities of their financial lives. This is a time consuming task requiring discipline, skill and specialized knowledge.
Driven by the risk shift, individuals and families will turn to products, services and trusted advisors to help them anticipate and understand the implications of their financial decisions. Financial institutions are well positioned to provide individuals and families with their increasingly complex financial planning and risk management needs.
While all adults are facing the risk shift, baby boomers (born 1946 – 1964) in particular have a very complex set of planning needs. They are reaching traditional retirement age, but many are also financing their kids’ education and dealing with aging parents. Gen Y (born 1980 to 2000) will also need help as they move from the relatively carefree spending days of the 20s to the more careful financial management years of middle-age.
The risk shift is a powerful trend that impacts almost everyone. It also creates new fee-based service and product opportunities for financial institutions that can effectively and efficiently help individuals and families navigate their increasingly complex financial lives.
For more information on this topic, you can view the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will transform the financial services industry over the next decade.
About Steve King: Steve is a Partner at Emergent Research. His current research and consulting is focused on economic decentralization, the growth of small business and the future of work and workplaces. Steve has extensive consulting, marketing and general management experience with both large and small companies. Steve is a senior fellow and board member at the Society For New Communications Research, a research affiliate at the Future of Work and an advisory board member at Pond Ventures.
About Carolyn Ockels: Carolyn is the Managing Partner at Emergent Research. Her current research and consulting is focused on economic decentralization, the growth of small business and Gen Y. Carolyn has extensive consulting experience, and prior to Emergent Research managed Cambridge Energy Research’s Asian energy consulting business, led market research in Japan for RCM Capital Managment, and held a variety of domestic and international consulting positions with the economic forecasting and planning consulting firm Data Resources, Inc.