In light of the vote on the AHV reform, the demographics in Switzerland are certainly in the spotlight. The aging population is also a big topic in finance – and not only a negative one, according to a new study.

The increasing life expectancy of individuals is often viewed as a burden by the collective. This is the case for both society and economics.

A new study conducted by Raiffeisen’s investment office only follows this narrative to a degree, however: the effects of the demographic change are diverse and complex, concede the banking group’s finance experts in a report published on Wednesday. They even recommend using the demographic change as an opportunity.

Pension Systems Under Strain

The authors of the study calculate that the life expectancies in the western world are increasing continuously. In Switzerland, it has risen by an average of 15 years since 1950 – from 71.1 to 85.7 for women, from 66.6 to 81.6 for men. At the same time, the birth rate has been falling for years, which leads to more of an aging population, the report finds.

According to Raiffeisen, this presents vast challenges, on one hand. The costs of the healthcare system are spiraling out of control. The pension systems are under strain, which is currently the subject of the vote on the AHV on March 3 (initiative for a 13th AHV pension payment and pension initiative). Real estate prices now remain at their highest level, and the ever narrowing labor market is leading to increased salaries and thus higher inflation and higher interest, warn the research specialists in the group.

Decreasing Potential Growth

In addition, the demographic developments in the industrial countries are reducing the potential growth – the fewer persons of working age there are, the lower the overall economic output.

On the other hand, there are also opportunities. For the healthcare sector, these opportunities are obvious. However, also the finance professionals see potential for the financial sector. This is because the majority of wealth belongs to the older generation, according to the authors, which paints them as an interesting group of customers for banks.

Financial Sector Gaining Importance

And yet, the sector can even score points among the younger generations, they expect. «Based on the increasing importance of private pensions, particularly for younger people, the relevance and acceptance of investing may increase.» And as many people have little or no confidence in making investments, the financial sector is becoming more important, the study continues.

It can also be said that these findings are playing into the hands of the players in wealth management in particular, the supreme discipline in Swiss banking. However, it also benefits the emerging business of asset management, where the required financial products are made.

Skills Shortage is Real

Nevertheless, the financial profession is also hit by the shortage of specialists which occurred when the Baby Boomer generation (in Switzerland, those born between 1946 and 1964) left the labor market.

The report finds that in order to fill this gap, there is a growing need for automation, robots and other technological developments such as artificial intelligence. The technology sector, which has already been blessed with the hopes of many investors, would also benefit from this trend.