2018 Marks the 40-Year Anniversary of the MacroMonitor: 1978–2018
In 1978, a group of visionaries from major banks, brokerages, and insurers, anticipating the convergence of their industries, hired SRI International to conduct a comprehensive, independent study of their customers' and prospects' financial behaviors and attitudes to understand and compete in the coming marketplace better. The MacroMonitor was born.
Today, convergence is behind us. However, financial products and services remain essential tools for surviving and thriving in modern society. Financial services have become concentrated in a handful of behemoths, a smattering of midsize firms, and a host of small, specialized providers. New technologies and alternative providers may be on the verge of disrupting the marketplace. The competition for your customers' attention and business is intense. In this environment of hypercompetition, ubiquitous availability, and product commoditization, every provider needs a comprehensive map of the marketplace (context) to acquire market share.
The MacroMonitor adds insights to the conversation by combining long-term consumer trends with external economic change. Following are four examples: economic indicators, credit-card debt, private-sector retirement plans, and life insurance.
At first glance, trends in aggregate GDP and personal disposable income paint a positive picture: Both have increased steadily in the past four decades. What this development does not reveal is the relative proportion of income concentrated in a smaller and smaller proportion of the population. The MacroMonitor—with its detailed information about the relative distribution of households and their assets, debts, and demographics—shows the impact of the income concentration across the households' complete balance sheet. This impact has already created a highly desirable concentration of households in the top 1% versus an affluent cadre of the top 10%, who are somewhat more constrained. If this development continues, financial providers may have to extend their services to less affluent households (the next 10%, whose needs differ) in order to grow.
Until the Great Recession (2008), credit-card debt continued to grow at a healthy pace. Postrecession, many households controlled spending and made efforts to minimize their debt exposure. Increased use of debit cards and cash and declining spending affected credit cards, consumer credit, and debt overall. According to the MacroMonitor, spending and the use of credit cards and consumer credit (especially student loans) have recovered by 2016; with the proliferation of new transaction media, the use of cash is declining.
Will the continued penetration of these new FinTech products—such as contactless payments and person-to-person transactions—have a greater effect on credit-card debt? Does the flexibility associated with online control of accounts, transfers, and other transaction vehicles encourage households to shift their debt to lower-cost options (some with tax advantages)?
Private-Sector Retirement Plans
In the past four decades, traditional pensions have declined in number and participation; today, roughly 30% of all households (including government employees) have a pension. At the same time, defined-contribution plans (401k, 403b, 457) have increased from serving very few households in 1979 to serving nearly half (45%) of households in 2017. Employers have successfully off-loaded their retirement responsibilities to their employees, but employees have not done a good job of preparing for retirement. The vast majority of households have insufficient savings—ignoring Social Security—to assure that their incomes will enable them to maintain the same lifestyle in retirement. The impact of a major medical incident will throw most of these households into a personal economic depression. With more than 70 million Boomers careening toward retirement, this train is heading toward the Grand Canyon, and the trestle bridge is out.
Life Insurance Companies
Household penetration of life insurance (group and individual) has been declining for more than two decades. The MacroMonitor reports that household ownership of any life insurance product has declined from 80% in 1982 to 58% in 2016; group insurance has declined from 58% to 41%, and individual insurance has declined from 36% to 19%.
Is the decline from 1,780,000 life insurance companies in 1970 to 814,000 in 2015 attributable to the decline in the number of life insurance companies and agents or a shift in the perceived relative value of life insurance vis-à-vis other protection products and competing financial needs such as debt repayment, saving and investing, and day-to-day expenses?
The MacroMonitor is the only program with 40 years of experience to help you survive today's challenges and succeed in tomorrow's marketplace:
- 40 years of comprehensive marketplace measurement
- 40 years of sizing populations and profiling their complete balance sheets, institution and channel use, and psychological underpinnings
- 40 years of tracking traditional and new products as they develop and diffuse through the marketplace
- 40 years of analyzing consumers' financial needs, goals, priorities, and trade-offs—learning how people respond and react to various offers and market events and how they all interact and influence consumers' financial decisions.
Contact us to learn more about the impact of these and other financial-industry trends on your consumer business.