The purpose of the study is to understand the design considerations for creating a provocative financial planning toolkit with services to help facilitate more constructive and meaningful conversations to build trust and empathy between financial advisors and senior people. We conducted four rounds of 60-minute co-creation workshops with eight invited participants from various design disciplines to work in pairs to generate four preliminary concepts suggesting design considerations. We used ATLAS.ti to do qualitative research analysis under an NCT (notice, collecting, thinking) model to identify 22 codes synthesized from verbal and behavioral data. The study concluded with three design principles: 1) the concept of financial planning is about people's expectation management, 2) a financial planning toolkit is designed under service systems, and 3) the tailor-made and modular design features can give financial advisors more flexibility to engage with senior people and enable them to share more about their life stories and needs to recommend financial planning packages precisely according to personal preference, health conditions, and financial status.

The present research examines the prevalence of predictions in daily life. Specifically we examine whether spending predictions for specific purchases occur spontaneously in life outside of a laboratory setting. Across community samples and student samples, overall self-report and diary reports, three studies suggest that people make spending predictions for about two-thirds of purchases in everyday life. In addition, we examine factors that increase the likelihood of spending predictions: the size of purchase, payment form, time pressure, personality variables, and purchase decisions. Spending predictions were more likely for larger, more exceptional purchases and for item and project predictions rather than time periods.

This paper illustrates the potential impacts of climate change on financial markets, focusing on their long-term significance. It uses a top-down modelling tool developed by Ortec Finance in partnership with Cambridge Econometrics that combines climate science with macro-economic and financial effects to examine the possible impacts of three plausible (not extreme) climate pathways. The paper first considers the impact on gross domestic product (GDP), finding that GDP is lower in all three pathways, with the most severe reduction in the Failed Transition Pathway where the Paris Agreement climate targets are not met. The model then translates these GDP impacts into financial market effects. In the Failed Transition Pathway, cumulative global equity returns are approximately 50% lower over the period 2020–2060 than in the climate-uninformed base case. For the other two pathways where the Paris Agreement targets are met, the corresponding figures are 15% and 25% lower returns than in the base case. Results are provided for other asset classes too. These demonstrate that climate change represents a significant market risk, with implications for financial planning, modelling and regulation.

The importance of funded private or occupational old-age provision is expected to increase due to demographic changes and the resulting problems for government-run pay-as-you-go systems. Clients and advisors therefore need reliable methodologies to match offered products with clients' needs and risk appetite. In Graf et al. (2012), the authors have introduced a methodology based on stochastic modeling to properly assess the risk-return profiles — i.e. the probability distribution of future benefits — of various old-age provision products. In this paper, we additionally consider the impact of inflation on the risk-return profile of old-age provision products. In a model with stochastic interest rates, stochastic inflation and equity returns including stochastic equity volatility, we derive risk-return-profiles for various types of existing unit-linked products with and without embedded guarantees and especially focus on the difference between nominal and real returns. We find that typical “rule of thumb” approximations for considering inflation risk are inappropriate and further show that products that are considered particularly safe by practitioners because of nominal guarantees may bear significant inflation risk. Finally, we propose product designs suitable to reduce inflation risk and investigate their risk-return profile in real terms.

As policy makers in the United Kingdom and many other countries grapple with financing the needs of an ageing population, financial planning for social care in later life is high on political agendas. We draw on qualitative research with older couples in the United Kingdom about their intimate money practices to analyse the day-to-day meanings attributed to money, saving and consumption in the context of financial planning for later life and death. We find that expenditure on funerals and home adaptations is discussed, negotiated and planned, as is ‘downsizing’ to release capital from the home for financing day-to-day expenses and leisure expenses. These outcomes are within easy contemplation and indeed money practice of older couples. In contrast, end-of-life planning for domiciliary or residential care was virtually non-existent across all socio-economic groups, and couples employed a range of techniques to avoid making these discussions ‘real’. Costs (while well known) are seen as astronomical, details are scarce, intensive domiciliary care is never discussed, and death is seen as preferable to residential care. We theorise antipathy to care planning as a product of social and psychological construction of the ‘fourth age’ as a period of abjection, and therefore ‘wasted’ expenditure. Exhortations by policy makers for individuals to consider care costs will be ineffective without recognition of the cultural transformation of later life.

Personal finance is a challenging topic which can benefit from a scientific approach to individual financial planning. This paper presents an individual asset liability management (iALM) model for life cycle planning which uses the methodology of dynamic stochastic optimisation and incorporates ideas from both classical and behavioural finance. Its implementation is in the form of a decision support tool for use by financial advisers or wealth managers. The investment universe is given by a set of indices for major asset classes and their returns are simulated forward over the lifetime of a household. On the liability side the foreseen cash flows of incomes and outgoings are simulated and punctuated by life events such as illness and death. The household's utility function is constructed for each time period over a range of monetary values in terms of household financial goals and preferences. Taxes and pension savings are treated using the tax shielded saving accounts specific to a national jurisdiction in terms of constraints in the optimisation sub-models. The paper goes on to present an analysis of iALM model recommendations for a representative UK household, together with an evaluation of the sensitivity of the financial plan generated to changes in market environments such as the 2007–9 crisis. The promise of this new technology is to bring modern decision support tools to individual investors in order to facilitate custom designed consumption, savings and investment policies.

The paper investigates the level and incidence of saving required in order to maintain the standard of living that a household experiences whilst of working age into retirement. In order to do this, a model has been constructed that follows the income and expenditure of a household, allowing for tax and social security, as well as changing family circumstances. The model can be used to explain how a household should save in order to achieve a given standard of living in retirement.

The author concludes that the usual message, to save a fixed proportion of income throughout a working lifetime, is at best not helpful and at worst could lead to a lower standard of living over the household's lifetime. People can and should manage the timing of their saving and borrowing in order to achieve optimum incomes.

This study examines the saving and insurance behaviour of 386 Boston University (BU) employees who volunteered to receive financial planning based on ESPlanner (Economic Security Planner) — a detailed life-cycle financial planning model developed by Economic Security Planning, Inc. Because the employees received their own financial plan, they had a strong incentive to provide full and accurate financial information. Hence, the data appear to be of particularly high quality for studying saving and life insurance decisions.

ESPlanner recommends annual levels of consumption, saving, and life insurance holdings that smooth a household's living standard through time subject to the household not exceeding its self-ascribed borrowing limit. The programme treats housing and special expenditures as ‘off-the-top’, adjusts for economies in shared living and the relative costs of raising children, makes highly detailed tax and Social Security benefit calculations, and permits users who don't want a stable living standard to specify how they'd like their living standards to change through time.

Our findings are striking. First, the correlation between ESPlanner's saving and insurance prescriptions and the actual decisions being made by BU employees is very weak in the case of saving and essentially zero in the case of life insurance. Many employees are spending far more and saving far less than they should, while others are under-spending and oversaving. The same holds for life insurance. The degree of under-insurance seems particularly acute. Almost 13 per cent of those BU spouses who are secondary earners would experience a 40 per cent or greater drop in their living standards were their spouses to pass away in the near future. Another 13 per cent would experience a 20 to 40 per cent drop. Second, planning shortcomings are as common among high-income professors with significant financial knowledge as they are among low-income staff with limited financial knowledge. Third, two thirds of BU employees are not in a position to smooth their living standards without exceeding their debt limits.