Everyone has a role
Elliott Shadforth, Asia-Pacific Wealth and Asset Management Leader, notes: “As the responsibility for long-term savings shifts from the state to the individual, governments and industry bodies have a significant obligation to invest in boosting financial literacy. The middle class especially must be made aware of the need for increased savings and educated so they can engage in the process of how their money is managed. Trials are already starting in some countries to use gamification for this purpose. Governments should also consider embedding financial literacy in the education curriculum.”
At the same time, pension reform can greatly change the business case for market entry. For example, the region’s governments are responding to the need for better consumer protections with: Japan’s focus on customer first code; Hong Kong’s default and governance focus; and Australia’s Royal Commission. At the same time, customers are better engaged, and more digitally connected and informed than ever before. As a result, we expect to see better practices, more predictable outcomes and fairer provider compensation and profits.
The question is when will these forces intersect with your business model in each market? How will you effectively manage business case uncertainty?
“The middle class especially must be made aware of the need for increased savings and educated so they can engage in the process of how their money is managed,” Shadforth adds.
The continued hyper growth of retirement assets driven by demographic pressure of a large aging population makes us bullish about the future of Asia and Japan’s retirement markets. If the region evolves from its current 30% of retirement assets to GDP to US-type levels of 96%, this hyper growth will continue for some time. And, this is without including mature market solutions, such as pension buy-outs, in the growth prospects.
Local and foreign private sector asset management and life insurance product and service providers will play a pivotal role in supporting the delivery of predictable retirement outcomes for increasing numbers of the region’s retirees. Innovators should be thinking bigger, focusing on building broader financial well-being ecosystems that cover, not just wealth, but retirement health and happiness.
But every player needs to watch their step when expanding, growing or transforming to deliver better retirement outcomes across the region. Asia’s context, culture and customers mean its retirement markets will require participants to think and act differently.