Mom, Dad: meet FinTech

By: Nelson Smith on December 1, 2016
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Finance was very different 15 years ago.

Online banking was in its infancy, Canadians visited their brokers for investment advice, and debit cards were the height of financial technology.

That’s all being shaken up. FinTech companies are disrupting the way Canadians invest, shop for financial products, and make payments.

For young people, it’s a no-brainer. FinTech offers solutions that are quick and convenient. But for those over 40, leaving behind what’s worked can be a big leap.

But it’s a leap that can have a world of benefits. Here are some ways that FinTech is poised to change the lives of Canada’s older population — for the better.

Mom? Dad? Meet the robo-advisor

Investment fees really begin to matter to Canadian savers the older they get. Paying an extra 1% on a $10,000 nest egg is tolerable, although not ideal. It’s only $100. But 1% on $500,000 is an extra $5,000 per year. Now we’re talking serious money.

Most investors would love to take control of their own portfolio, but they’re just too scared. The risk of compromising their life savings is just too high. So they stay with their financial advisor, paying fees of 2% or higher on their mutual funds.

A robo-advisor can change that. It uses software (along with some human interaction) to choose a portfolio of low-cost index funds. Even after adding on the cost of the robo advisor’s service, investors can easily save 1% of assets annually on management fees alone, at least versus traditional mutual funds.

For older investors, with larger investments, this can mean significant savings. Thanks, FinTech!

Mortgage brokers = more options

As the price of real estate shoots up across the country, many homeowners have responded by cashing out their equity. Boomers have used the cash to travel, supplement retirement savings, or help their children get a foothold in expensive housing markets. Because many boomers are property owners, it’s likely this trend will continue.

The obvious outcome here is for seniors to sell their primary residence and downsize. But not everybody wants to leave their home, and many aren’t comfortable using investments to convert capital to income.

Enter the opportunity for FinTech companies. They can connect borrowers to alternative lenders and provide products such as reverse mortgages. This will likely be done through a mortgage broker, who can offer multiple options for an aging homeowner.

Grandma’s gig economy

Many retirees will get part-time jobs when they hang up their proverbial skates. Some simply aspire to get out of the house. Being a productive member of society feels good. Others will need the money to afford some of retirement’s luxuries.

The gig economy is the perfect solution. Renting out a spare room to travelers on Airbnb is easy and will generate a little extra money, plus there’s the added bonus of meeting interesting people. Same goes for driving part-time for Uber.

The beauty of those part-time gigs — aside from the additional income — is the flexibility. A side hustle is great for boomers and knowing that it will never come at the expense of time with the grandkids? Perfect.

FinTech for all

FinTech is here to stay. And it’s not just for younger generations, either. Canada’s aging population stands to benefit from technical innovation in the financial world as much as anyone does. The challenge will be educating them that newer, better alternatives exist.