Demographic barbell.

The existence of a digital demographic barbell* – generation Y/M + seniors – is something I’ve observed and have been talking about for several years. Indeed I became more confident of this thesis about 3 years ago when my parents came to visit and I saw my Dad spending an hour or so a day on the web (mainly checking weather, stocks and local (back home) news.) So I was nodding in agreement when I stumbled upon this recent article from the Spectator, ‘Wired, retired and so hip it hurts’:

On a personal level I can see evidence of a new approach to technology taking place. My parents-in-law do not consider themselves to be technophiles, but they were the first people I know who downloaded Skype. Skype, a VOIP (Voice Over Internet Protocol) application, allows you to use your computer like a telephone and ‘talk’ through the microphone to other computers for free. Next they added a webcam as they wanted to be able to video-chat with their three young grandchildren in Paris. After quizzing my friends about their experiences with their own parents, I realised that digitally savvy grandparents are increasingly becoming the norm whereas none of us urban young professionals are using anything like webcams.

The theory goes as follows: the pre-baby boomers, retired yet healthy and engaged, have the time to learn and adopt powerful new technologies and the motivation to do so: whether to stay in touch with increasingly dispersed children and especially grandchildren, or to more actively manage their capital (increasingly important given lengthening life expectancies and more active retirements), or to organize their active travel and social agendas.

Less obvious – but I think also important – is that, having left the traditional rat-race, they have less fear, less of a chip on their shoulders than the slightly younger baby-boomers. They have nothing to lose. The baby-boomers, having spent a lifetime driving change and being ‘in charge’ and now settled in the proverbial corner office, suffer from a collective ‘not-invented-by-us’ disdain and clearly have the most to lose (if the proverbial rules of the game are changed.)

The implications of this digital generational barbell are clearly significant for many sectors of the economy. However for financial services firms its importance is impossible to overstate. And for the most part I don’t think the industry has really come to grips with this. (BBC reports: “Online banking boom for over 55s”):

The recent boom in internet banking has been greatest for people aged over 55, a report suggests, with 3.6 million of them banking online last year.

The Association of Payment Clearing Services (Apacs) said between 2001 and 2006 the number of internet bank users in this age group rose by 350%.

This compared to a 175% rise in the total number of adults banking online.

That means 17 million adults in the UK banked online last year, compared with 6.2 million in 2001.

“While younger people continue to make up the majority of online banking users, the greatest proportion of new internet bankers are the over 55s,” said Sandra Quinn, from Apacs.

Another opportunity.

*the term barbell in markets originally referred to replicating a position in a medium maturity bond using a combination of very short and very long duration securities (leading to a gain in convexity); it has however become generalized to mean any strategy that uses two extreme elements (often instead of a more traditional ‘mainstream’ element), for example investing in ETFs and Hedge Funds (instead of in a traditional long-only mutual fund.)

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