Final Report Summary - RISK COMMUNICATION (Designing Evidence-Based Communication for Elderly Consumers in Financial Distress)
1. Summary description of the project objectives
Across the European Union, financial distress in older age is a growing problem, with poverty affecting on average 20% of elderly consumers. Longer life expectancy, declining public pension funds, and longer spells of un- and underemployment make financial distress in older age more likely, not only for lower-income European consumers, but also the average European population. Older age and retirement mark the decumulation phase of the life cycle, with financial assets needing to last until the end of life. The fellow contributed her expertise in behavioral economics, financial planning, and the design of financial education and counseling interventions, to better understand and ultimately facilitate these financial decisions of elderly consumers.
*The overall goal of the project was an improved understanding of effective designs of financial planning communications for European consumers at risk of poverty in older age. To achieve this goal, the fellow and her collaborators at Leeds University Business School pursued four objectives:
Objective 1) Characterize expert knowledge about the financial risks and challenges elderly consumers face in making decisions about asset decumulation, debt management, and financial planning strategies
Objective 2) Characterize elderly consumers’ beliefs and challenges they perceive in making decisions about asset decumulation, debt management, and financial planning strategies
Objective 3) Determine how the beliefs and challenges elderly consumers face in asset decumulation, debt management, and financial planning strategies are associated with their financial decisions and experienced outcomes; and
Objective 4) Develop recommendations for regulators, the financial advising industry, and consumer advocacy groups about how to facilitate elderly consumers’ decisions about decumulation, debt management, and financial planning strategies.
2. Description of the work performed since the beginning of the project
Objective 1) Literature review and expert interviews: Two literature-reviews are completed, examining patterns and explanations of over-indebtedness in older age in Germany and reviewing causes, consequences, and interventions of old-age poverty in Europe. The research team conducted 31 interviews with experts in Germany, the Netherlands, and the U.K. Expert backgrounds included financial planning, consumer credit counseling, academic research, banking, consumer advisory services, religious organizations, government services, health services, and consumer advocacy. Interview responses were summarized, categorized, and contrasted to the consumer interviews (see Objective 2). Key themes were included as questions in the confirmatory survey questionnaire (see Objective 3)
Objective 2) Mental models interviews with consumer: We conducted 46 mental-model interviews with adults aged 60 or older in Germany, the Netherlands, and the U.K. Interviewees were recruited from areas with particularly high poverty rates in the three countries. The interviews lasted on average almost one hour (51:19 min.), 23 interviewees were male, 23 female, and the average age was 70.7 years, ranging from age 60 to age 85.
Objective 3) Confirmatory survey of older adults: We developed an online survey instrument to confirm the insights from expert and consumer interviews. A total of 1,050 financially distressed adults aged 65 and older in Germany, the Netherlands, and the U.K. completed the survey (350 individuals in each country). Data analysis investigates the association of financial distress and indicators of physical and psychological well-being. Based on interview data, confirmatory data collection examined three themes: food insecurity, loneliness and depression, and the quality of family support networks.
The Marie Curie research resulted in three additional projects and partnerships:
(i) Collaboration with Creditreform Boniversum, one of the largest German credit reporting agencies in Germany on the analysis of to consumer attitudes toward consumer debt across age groups and its impact on financial and health-related wellbeing.
(ii) Collaboration with the Longitudinal Aging Study Amsterdam on examining predictors of financial distress based on this panel’s rich longitudinal data on the physical, cognitive, emotional, and social components of functioning in older persons.
(iii) Collaboration with the Centre for Decision Research, University of Leeds, on older adults’ responses to the Pension Freedom regulation in April 2015.
Objective 4) Risk communication protocols: Protocols are being developed as part of the data analysis and discussion.
3. Description of the main results achieved so far
*Through interviews with nationally recognized experts on aging and financial planning and with older adults, causes and consequences of financial distress in later life emerged. In particular, the interview data provide new insights into the emotional burdens of debt, the trade-offs in meeting basic needs (“eating or heating”), the lack of family support, and reasons for the hesitancy to use the help of debt advisory services.
*The confirmatory survey focuses on the associations between financial distress in older age and the physical, cognitive, and social wellbeing of older persons. In particular, data analysis investigates food insecurity, financial planning and frugality, financial knowledge, self-control failure and action inertia, loneliness and physical activity, life satisfaction and coping strategies as key variables associated with financial hardship in older age.
*Research outcomes are actively being transferred through formal and informal presentations to researchers, policy makers, consumer advocates, and the financial industry. In particular, an international group of key policy makers, pension-fund administrators, and academics was informed about the Marie Curie Project’s research at the Rotman International Centre for Pension Management’s Discussion Forum in October.
*Graduate and undergraduate students learned about the Marie Curie Project through the development of a teaching module, the advising of a bachelors’ thesis, and the collaboration with a post-doctoral researcher.
4. The expected final results and their potential impact and use
This research expands the boundaries of current knowledge on consumer financial decision-making and risk communication in several important and innovative ways. The socio-economic impact and the wider societal implications include:
*First, the research is, to the best of our knowledge, among the first systematic investigations in the European Union of elderly consumers’ knowledge, beliefs, and experiences with asset decumulation, debt management, and financial planning strategies and associated financial products. We are currently preparing a series of publications to inform both the academic community and the community of regulators, the financial advising industry, and consumer advocacy groups.
*Second, this study takes a new and innovative approach of applying evidence-based concepts of risk perception and communication research to understanding financial decisions of elderly consumers, and potentially helping them to overcome financial planning problems. Risk perception and communication approaches are highly relevant here, as their purpose is to understand how lay audiences make decisions, with the goal of identifying the knowledge gaps, misconceptions, and barriers to making informed decisions. For instance, the collaboration with the Longitudinal Aging Study Amsterdam in the Netherlands and the German credit reporting agency Creditreform Boniversum allows us to address communication barriers from both the perspective of medical institutions as well as the financial industry. It complements the work at the host institution at the Leeds University Business School, which investigates the social-psychological aspects of risk communication.
*Third, this research is among the first to systematically investigate elderly consumers’ potential need for financial advice and their preferences. For instance, our study on pension-related financial decision-making in older age investigates the role of the newly-introduced government advisory service “PensionWise.” It finds that the advisory service was able to assist pensioners in deciding between lump sum withdrawals and annuity investments.
*Finally, this study systematically develops protocols for the design of evidence-based risk communications aimed at the financial management risks of elderly consumers in financial distress. Our distribution channels include consumer debt advisory services, food banks, faith-based institutions, and community-based aging networks.
*The address of the project public website is: http://lubswww.leeds.ac.uk/cdr/projects/designing-evidence-based-communication-for-elderly-consumers-in-financial-distress/
Across the European Union, financial distress in older age is a growing problem, with poverty affecting on average 20% of elderly consumers. Longer life expectancy, declining public pension funds, and longer spells of un- and underemployment make financial distress in older age more likely, not only for lower-income European consumers, but also the average European population. Older age and retirement mark the decumulation phase of the life cycle, with financial assets needing to last until the end of life. The fellow contributed her expertise in behavioral economics, financial planning, and the design of financial education and counseling interventions, to better understand and ultimately facilitate these financial decisions of elderly consumers.
*The overall goal of the project was an improved understanding of effective designs of financial planning communications for European consumers at risk of poverty in older age. To achieve this goal, the fellow and her collaborators at Leeds University Business School pursued four objectives:
Objective 1) Characterize expert knowledge about the financial risks and challenges elderly consumers face in making decisions about asset decumulation, debt management, and financial planning strategies
Objective 2) Characterize elderly consumers’ beliefs and challenges they perceive in making decisions about asset decumulation, debt management, and financial planning strategies
Objective 3) Determine how the beliefs and challenges elderly consumers face in asset decumulation, debt management, and financial planning strategies are associated with their financial decisions and experienced outcomes; and
Objective 4) Develop recommendations for regulators, the financial advising industry, and consumer advocacy groups about how to facilitate elderly consumers’ decisions about decumulation, debt management, and financial planning strategies.
2. Description of the work performed since the beginning of the project
Objective 1) Literature review and expert interviews: Two literature-reviews are completed, examining patterns and explanations of over-indebtedness in older age in Germany and reviewing causes, consequences, and interventions of old-age poverty in Europe. The research team conducted 31 interviews with experts in Germany, the Netherlands, and the U.K. Expert backgrounds included financial planning, consumer credit counseling, academic research, banking, consumer advisory services, religious organizations, government services, health services, and consumer advocacy. Interview responses were summarized, categorized, and contrasted to the consumer interviews (see Objective 2). Key themes were included as questions in the confirmatory survey questionnaire (see Objective 3)
Objective 2) Mental models interviews with consumer: We conducted 46 mental-model interviews with adults aged 60 or older in Germany, the Netherlands, and the U.K. Interviewees were recruited from areas with particularly high poverty rates in the three countries. The interviews lasted on average almost one hour (51:19 min.), 23 interviewees were male, 23 female, and the average age was 70.7 years, ranging from age 60 to age 85.
Objective 3) Confirmatory survey of older adults: We developed an online survey instrument to confirm the insights from expert and consumer interviews. A total of 1,050 financially distressed adults aged 65 and older in Germany, the Netherlands, and the U.K. completed the survey (350 individuals in each country). Data analysis investigates the association of financial distress and indicators of physical and psychological well-being. Based on interview data, confirmatory data collection examined three themes: food insecurity, loneliness and depression, and the quality of family support networks.
The Marie Curie research resulted in three additional projects and partnerships:
(i) Collaboration with Creditreform Boniversum, one of the largest German credit reporting agencies in Germany on the analysis of to consumer attitudes toward consumer debt across age groups and its impact on financial and health-related wellbeing.
(ii) Collaboration with the Longitudinal Aging Study Amsterdam on examining predictors of financial distress based on this panel’s rich longitudinal data on the physical, cognitive, emotional, and social components of functioning in older persons.
(iii) Collaboration with the Centre for Decision Research, University of Leeds, on older adults’ responses to the Pension Freedom regulation in April 2015.
Objective 4) Risk communication protocols: Protocols are being developed as part of the data analysis and discussion.
3. Description of the main results achieved so far
*Through interviews with nationally recognized experts on aging and financial planning and with older adults, causes and consequences of financial distress in later life emerged. In particular, the interview data provide new insights into the emotional burdens of debt, the trade-offs in meeting basic needs (“eating or heating”), the lack of family support, and reasons for the hesitancy to use the help of debt advisory services.
*The confirmatory survey focuses on the associations between financial distress in older age and the physical, cognitive, and social wellbeing of older persons. In particular, data analysis investigates food insecurity, financial planning and frugality, financial knowledge, self-control failure and action inertia, loneliness and physical activity, life satisfaction and coping strategies as key variables associated with financial hardship in older age.
*Research outcomes are actively being transferred through formal and informal presentations to researchers, policy makers, consumer advocates, and the financial industry. In particular, an international group of key policy makers, pension-fund administrators, and academics was informed about the Marie Curie Project’s research at the Rotman International Centre for Pension Management’s Discussion Forum in October.
*Graduate and undergraduate students learned about the Marie Curie Project through the development of a teaching module, the advising of a bachelors’ thesis, and the collaboration with a post-doctoral researcher.
4. The expected final results and their potential impact and use
This research expands the boundaries of current knowledge on consumer financial decision-making and risk communication in several important and innovative ways. The socio-economic impact and the wider societal implications include:
*First, the research is, to the best of our knowledge, among the first systematic investigations in the European Union of elderly consumers’ knowledge, beliefs, and experiences with asset decumulation, debt management, and financial planning strategies and associated financial products. We are currently preparing a series of publications to inform both the academic community and the community of regulators, the financial advising industry, and consumer advocacy groups.
*Second, this study takes a new and innovative approach of applying evidence-based concepts of risk perception and communication research to understanding financial decisions of elderly consumers, and potentially helping them to overcome financial planning problems. Risk perception and communication approaches are highly relevant here, as their purpose is to understand how lay audiences make decisions, with the goal of identifying the knowledge gaps, misconceptions, and barriers to making informed decisions. For instance, the collaboration with the Longitudinal Aging Study Amsterdam in the Netherlands and the German credit reporting agency Creditreform Boniversum allows us to address communication barriers from both the perspective of medical institutions as well as the financial industry. It complements the work at the host institution at the Leeds University Business School, which investigates the social-psychological aspects of risk communication.
*Third, this research is among the first to systematically investigate elderly consumers’ potential need for financial advice and their preferences. For instance, our study on pension-related financial decision-making in older age investigates the role of the newly-introduced government advisory service “PensionWise.” It finds that the advisory service was able to assist pensioners in deciding between lump sum withdrawals and annuity investments.
*Finally, this study systematically develops protocols for the design of evidence-based risk communications aimed at the financial management risks of elderly consumers in financial distress. Our distribution channels include consumer debt advisory services, food banks, faith-based institutions, and community-based aging networks.
*The address of the project public website is: http://lubswww.leeds.ac.uk/cdr/projects/designing-evidence-based-communication-for-elderly-consumers-in-financial-distress/