Page 2: External factors influencing change
One of the main challenges for decision-makers is to understand the environment in which they are operating. They can then identify key issues which they need to respond to. Understanding these key issues improves decision-taking and reduces uncertainty. Few industries have experienced as many changes in their external environment in recent years as financial services.
Thinking ahead and saving for retirement is a concept that is sometimes difficult for people to understand. In the UK, life expectancy has risen in recent years so people can expect to be retired for longer. In many instances, individuals have not planned properly for retirement and there may be a shortfall in the amount of money available. There is also a drive by the government to reduce dependency on the State in old age. Added to this many companies have introduced new, less expensive pension schemes or insisted on employee pension contributions where they did not in the past. These factors mean people have to make decisions to invest properly at an earlier stage of their working lives. Investing in the future helps people to prepare in advance for old age. The benefits of such an investment are only realised years later.
The life insurance and pensions industry, in which AEGON operates, has had a poor reputation in recent years. Some organisations have been accused of 'mis-selling' by not providing consumers with the best product for their needs. To prevent similar situations arising in the future, the Financial Services Authority (FSA) has put significant amounts of regulation on the industry.
Financial services products are often difficult to understand. People do not always feel equipped to choose between the range of financial products and services and are not sure where to seek support and advice. In addition, falling values on the Stock Exchange have affected the investment returnon some products, such as mortgage endowments. For some people this means that the product they bought has not delivered the financial return they expected. All this has created uncertainty in the financial services industry.
The industry has also been characterised by intense competition. AEGON is in competition with organisations which sell directly to consumers and which are better known in the UK. AEGON distributes its products and services to customers mainly through financial advisers. AEGON, as a reputable company, has had to address and overcome these industry-wide problems to remain competitive.