Debt has become the centre of many young people's lives, thanks to the rising costs of higher educat...
Debt has become the centre of many young people's lives, thanks to the rising costs of higher education and buying property. The free assets that the government wants them to save are simply no longer there until they move unto their late 20s. More worryingly, both the industry and government does not seem to be addressing the fact that the 30-40 age group may be the last generation to hold today's savings and finance mentality, and that the younger generation are likely to need debt management before a pension.
If the industry is keen to persuade consumers to save for the long-term, it has to be recognized there are two emerging sectors of clients, with different financial advisory and product needs. Building products for today's immediate market will solve the short-term problems, but more reform will be needed again at a later date to cater to the younger audience.
Rafts of reports continue to show that reform of the financial services industry is desperately needed if the government is to avert the pensions timebomb and poverty in retirement. Yet altering products, distribution or the inclusion of advice will only deal with short-term problems unless the industry takes a good look at the concerns and needs of tomorrow's clients.
There is a great deal of industry emphasis on the prospect of people living longer. Suggestions are the current 30-40s bracket will left in a dire financial state unless the industry acts immediately to get people into long-term savings. However, based on proposed and whispering government policy, the possibility of young people saving as soon as they starting their working lives is diminishing. The large percentage that go to university now start work servicing an average debt of around £12,000, whereas young people are always encouraged to try and build deposits to get onto the property ladder.
If government plans to get more people into education do go through, around 50% of under 30s will be in education by 2010, and many of them could start life with debts of at least £25,000 - given suggestions there will be more university top-up fees. Many of those people who do not have assets saved for their education will be in their 30s before they can even consider saving.
We're already seeing the effect the changing debt culture is having on young people. Research figures suggest one in four men under the age of 30 still live with their parents so they can eventually afford to buy their own property. Other people under 30 - including IFAonline's very own editor - have ruled out the prospect of ever buying their own home. Inability to save deposits at an earlier age is pricing them out of the housing market, and yet the industry's emphasis for reform looks at encouraging savings, rather than addressing the issues that future customers will need to get a grip on.
Of course financial services firms should look at ways of improving the market for consumers. Sectors have to reform once in a while to ensure clients are getting the best deal possible. But reforming the market without recognizing how the clients needs will change again will leave the government and financial groups with a bigger headache than the one they face now.
If you have comments on this or any of IFAonline's stories, either post your thoughts on the discussion boards or email the editor: [email protected]
In association with Professional Adviser
Mortgages Market Study
Latest news and analysis
Our weekly heads-up for advisers