In his session, RETHINK: The 100-year life, the Professor of Economics at London Business School and consulting scholar at Stanford University’s Center on Longevity explored research on the economic, financial and social effects of longevity, and what it meant for financial advice.
“There is a major shift in human existence underway and we need to find ways to adapt to it — if we don’t, people will age badly,” he said.
“When we talk about longevity, it’s not just that more of us are getting old, but also how old we are getting. It is a really long-run trend and essentially centenarians are now the fastest-growing demographic group in the world. In fact, the majority of children born in rich countries today will live to be over 100.
“As a result, whether people like it or not, the chances are that they will live longer than the previous generations, and they need to prepare for this — not just financially but also with their health, relationships, skills and purpose.”
Professor Scott pointed out that along with this new certainty of reaching old age comes the prospect of a longer working life.
“This has significant implications across the board, for governments, corporates, regulators, as well as communities, hospitals, schools, and of course families and individuals,” he said.
“Our labour markets are already being driven more and more by people working longer — my own research shows that in the richest G7 industrialised nations, around 85 per cent of employment growth in the past 20 years has come from people aged 50 and above.”
While raising the retirement age has been put forward as a response, Professor Scott said this would cause its own problems.
“During the 20th century, a ‘three stages of life’ approach of education, work, retirement, was established which worked well when life expectancy was 75 years. But in the 21st century, when life expectancy will reach 100, this approach will no longer serve,” he said.
“Increasingly, retirement is not viewed as a binary solution where people are either working or not working. Instead, there is a transition — for example, from working five days a week to working four days a week. What really complicates this is that longevity doesn’t work the same for everyone — this requires diversity in financial planning.”
Professor Scott added that aside from teaching financial literacy in schools, “making advice cheaper by addressing the regulatory framework, and democratising access to financial advice”, we also need to change the way we think about financial advice.
“It shouldn’t be just about savings but also about integrating finances and health, maintaining skills, nurturing relationships,” he said.
“A key element is understanding risk preferences. Too many people think of ageing as a process of decline, and they worry about dementia [and] physical health. This is understandable, but we tend to underestimate the abilities of older people and our later years. People’s preferences change as they age and they might not require so much money, so planners need to reassure clients and prepare them for whatever lifestyle they choose.
“The biggest concern about increasing longevity is that people aren’t prepared, and financial planners have a key role to play in that.”
