A 2022 Forbes personal finance article declared that the linear life is dead. The linear life is one in which you enter and exit certain life stages at certain times, such as getting married and having children when you are young, and retiring when you are older. It is, however, becoming less likely that you will enter life stages at a particular age, and that you will only experience them once in your life. But, while your clients may no longer follow a predictable life stage plan, they will need more not less financial advice.
Linear life-stage models have changed
The linear life-stage model assumes that people move through mostly predictable life stages:
- You live with both your parents when you are young and they ensure you receive an education
- You start working in your 20s, and acquire your own home
- You get married, start a family, and provide for your kids, around your 20s and 30s
- In your older years, 55+, you retire, living off your savings
This model made it fairly easy to identify financial needs. Just married and new parents needed life insurance, for example, while retirees needed a plan for how to spend their investments, intended to see them through retirement, and, where possible, be inherited by future generations.
Not everyone has always lived a linear life, and today fewer are following the rigid definitions and time-frames. Your clients of tomorrow may look a little different to your clients of past years.
The rise of singles
Single parents, especially single mothers in South Africa number in the millions. Census 2022 found that nearly 50% (49.6%) of South African households are headed by a woman.
Further, a high 62.2% of South Africans have never married. Over the last 11 years (Census 2011 and Census 2022 data) the number of never marrieds has risen while the number of marrieds as well as those living together has fallen.
Singles with no children are also on the rise. A quarter of households are singles, according to the Stats SA 2022 General Household survey. That is millions of South Africans.
Nuclear families, two parents and kids, made up 40% of South African households in 2022 (General Household survey). Many more families in South Africa are either extended families, families caring for dependant family members and children or multi-generational families, caring for grandparents and kids, and/or step-children. Children can also range in age from toddlers to older teens and twenties, with second or third partnerships enjoying a newborn later in life for one or both parents.
There are also a growing number of same-sex couples. 18% of South Africans said they have attended a same sex couple wedding, according to the Ipsos LGBT+ Pride 2021 global survey.
Changing gender definitions and roles
Globally, 2% of the populations surveyed in the 2021 Ipsos study identified as transgender, higher than the reported 1% in South Africa. Although the numbers seem low, keep in mind that as new generations gain prominence, the number is likely to grow. For example, 4% of Gen Z identify as transgender versus 2% of Millennials versus 1% of Gen X and less than 1% of Baby Boomers.
Implications for the life-stage model and financial advice
Increasingly non-linear lifestyles will see people moving through different life stages at different times, sometimes at the same time and more than once. There are three critical implications for financial advice.
Greater need for financial advice
A family with younger and older children needs help balancing multiple needs, from saving for education for a toddler to planning retirement. A single-parent sole breadwinner needs help stretching their income to ensure their children are financially secure if they are no longer around. A single parent also needs help managing their income to cover housing costs (always cheaper with two) and retirement plans. Retirees who have not accumulated enough savings need advice on what their financial options are.
Assumptions are off the table
Marriage and kids can no longer be an automatic assumption, gender can no longer be an automatic assumption, retirement can no longer be an automatic assumption. This makes financial advice a bit more complicated, and does require you to really get to know your client as an individual so you can offer appropriate advice based on their circumstances and needs.
Soft skills are on the table
Soft skills will be an additional requirement for success as a financial adviser in addition to specialist advice, financial services and product knowledge. For example, you may need to establish how your client needs to be addressed by asking them what their pronoun is. You can no longer make assumptions about how many families your client is caring for, even if they are married. Think of those who marry later in life, or who marry for a second time and need to care for different families, a new family, all the while ensuring their insurances, investments and wills are in order.
You will also need to avoid gender and age biases. The person you think is a client’s father may be a new partner, your client in high heels and make up may preferred to be called he. A quick way to avoid biases is to use gender and age neutral language in communications, for example by using they instead of him. Asking questions is also critical, and will establish that you are interested and won't make assumptions about your clients.
Soft skills such as listening to your clients, asking questions and expressing empathy, have always been skills financial advisers need to build trust. Increased compliance and admin burdens relegated their importance to some degree. The rise of non-linear lifestyles has brought them back to the forefront.
Linear is not dead, it’s just become multiple
Chances are high your clients will experience many of the traditional life stages, just not when initially expected or in the same order, some they may even revisit. This is good news for financial advisers. Offer your clients the advice and products they need for their life and they will trust you. And, with extended and blended families, you may even have the opportunity to take on new clients.