You’re probably well aware of the Sharknado phenomenon—a straight-to-television disaster movie, where a water spout lifts sharks out of the ocean and deposits them in downtown Los Angeles. The heroes deal admirably with this inexplicable influx of predators and after much bloodshed, emerge victorious.
While the movie was distinctly B grade, the media hype that accompanied it was simply astonishing. It got me thinking about what makes a good/bad disaster movie, given the formulaic approach they tend to adopt:
1. Think of some absurd concept—the crazier the better.
2. Identify with an individual or group fighting to survive.
3. Against all odds, and with much bloodshed, the hero overcomes all.
This is all well and good, but what does this have to do with financial planning? Well, it seems that as an industry we are potentially in the midst of our very own, slow-moving disaster movie—that is, the onslaught of the aging population and the impact of longevity. Now while seeing a great white pointer coming out of a tornado may seem slightly more daunting than a geriatric surfing a tidal wave, the impact of the latter is much more profound, predictable, and likely.
The statistics themselves are simply staggering. By 2050, almost a quarter of the population will be over 65 compared to 14% now. Given that almost 65% of all superannuation assets are held by people between the age of 45 and 54, the amount of money in motion as this group retires will be too large to ignore. As our “Politics of Pensions” thought piece highlights, the implications are broad and will impact on all corners of the Australian community, from business owners and taxpayers through to government policy makers.
When observed through this lens, the impending pressure of longevity has much in common with our traditional disaster movie. It’s no surprise that much of the language adopted by the media and those in the industry attempting to highlight the issues is very similar to what you might find on a movie poster—the “Longevity Tsunami” paper written by the Actuaries Institute (available here) is a good example.
Combine this with the impact of the sweeping reform that the industry has been subjected to, together with rapid technological advances, and the industry is facing a perfect storm (another great disaster epic). The ramifications for the advice industry are immense. Faced with increased demand, regulation, and complexity, there is both a risk and opportunity that presents itself to those up to the challenge.
Fortunately, we’re already seeing potential heroes step up to take on these issues head on. Successful advisers and early movers in this space appear to be taking similar paths, by:
• Retooling their advice proposition to become more strategic in nature, with increasing focus on client objectives
• Developing a hunger for understanding the complexity of the issues and becoming subject matter experts
• Leveraging the latest analytical tools to offer greater insight and value add
From the perspective of this website, both Lonsec and Milliman have set out to accompany you on this mission. As your partners, we intend to provide you with the necessary advice, research, and tools—all in a single and convenient location. We understand that there is not a silver bullet to solve these issues and that ultimately it will be a joint effort.
To this end, this site intends to provide relevant information across the following areas, including:
• Thought leadership
• Portfolio construction guidance and advice
There are also some exciting plans for the future, including the development of discussion forums and a variety of tools to assist advisers in their implementation of objectives-based advice.
Most importantly, we believe that the subscriber community has plenty to add in this space and that we will all benefit from the sharing of experience. You’re invited to participate in the conversation and we look forward to your comments.
With all this at your fingertips, we’ll help you navigate the challenges and avoid becoming shark bait.
This article first appeared at LonsecRetire.com.au.