Welcome back to our Fintech for Elderly blog series. In case you missed it, Part 1 covers the trends and financial challenges seniors are facing as the global population ages. In Part 2, we explore opportunities in the space and zero in on leading startups pioneering innovative solutions. Prospective founders, take note.
Pensions & Retirement Planning Need a Tech Boost
As state pensions dry up and private pensions move toward defined contribution, seniors and working professionals are seeking out tech-enabled wealth management tools to help them plan their cash flow throughout retirement and save enough to execute on these plans with ample flexibility to address unforeseen expenses.
Some tech-enabled pension providers are offering essential tools into retirement cash flow planning through accumulation (nutmeg) or consolidation (PensionBee). Others, like Penfold, target audiences which are ill-served by traditional pension products.
Such tools designed to improve retirement scores and tailored investment recommendations, enable users to make informed decisions when retirement comes.
Retirement age is getting pushed back as people continue to live longer, healthier lives. Still aiming to live flexible lives after 60-plus, retirees and soon-to-be retirees are looking for new ways to earn supplemental income and access professional training beyond traditional retirement age. Online communities geared toward the 50-plus cohort like Rest Less are helping seniors find full/part-time jobs and volunteering roles. Other opportunities exist for helping seniors with the professional training required to keep them in modern occupations.Tapping Into Illiquid Real Estate
Real estate is increasingly valuable and is anchoring the majority of household wealth through retirement. However, it’s highly illiquid: if you need to tap into the equity locked in your home, you need to sell all of it. Transformative business models such as sale-leasebacks, shared ownership, HELOCs and reverse mortgages allow seniors to tap into their previously illiquid home equity at fair terms. ‘Sell & Stay’ by EasyKnock is a great example of an innovative sale-leaseback program providing homeowners liquidity with immense flexibility. In the future, we foresee such tools for a new source of liquidity seamlessly integrate into pension planning tools as a way to create a truly holistic view of retirees’ assets and sources of potential income.
Wealth Management Aggregation and Estate Planning: Single Source of Truth
Platforms that provide pension asset aggregation with smart, tax-optimized cash flow planning and advice do not exist yet. Therefore, probably one of the biggest opportunities lies in helping seniors prepare for retirement by providing a holistic view of their assets, liabilities and predicted cash flow of income and expenses. Such an aggregate view is essential because it has very significant implication on taxation and as an extension on one’s financial resources during retirement.
Notable M&A activity has primed estate planning components of wealth management for digital transformation. Given consolidation, individuals can gain access to a holistic overview of all their assets and estate. A growing number of tech-focused solutions, often backed by wealth advisory firms, are establishing a single source of truth for succession and when dealing with death. Some companies, like empathy, take it a step further by navigating families through complex affairs following the death of a loved one.
Software is eating the world. The increased adoption of the internet among the elderly on the one hand will be a main driver behind many of the tech-enabled services that will be built to serve this market, but on the other hand will also create a new set of risks of digital fraud. For the less digitally-savvy, new Fintech solutions which address technological vulnerabilities via education and anti-fraud tools are sorely needed. Carefull, for example, uses open banking technology to allow people to track their loved one’s finances whereas True Link provides Prepaid Cards that work within customized parameters.
Opportunities Surrounding Longevity Risk
As more seniors need healthcare services and assistance for either aging in place or in senior housing facilities, there is a growing opportunity for tailored solutions to finance or lower the cost of receiving assistance and for sustaining longevity. We see Fintech solutions being applied to the various aspects of longevity risk: companies such as LiST provide liquidity for life insurance policy holders or offer solutions for aging in place, while others such as assured allies help LTC carriers lower their costs using a combination of data, technology and operational excellence.
There are so many opportunities for providing disruptive solutions to the financial needs of the senior community, and while many companies are already vying for market share, we believe it’s still the early days and we continue to look for more innovation. If you’re an entrepreneur in this space, share with us what you’re doing!
*All numbers derived from Pitchbook