Financial services firms could be doing more to help UK households build greater financial resilience, according to a panel of experts.
Participants of the Money Matters Index Summer Roundtable suggested that there is greater potential to improve Britons’ wealth and well-being.
Increased product innovation and a focus on putting the customer first, ahead of product, profits or compliance is needed by the industry, the group argued.
Myron Jobson, senior personal finance analyst at interactive investor, said: “Financial services need to work harder to get more than just the low-hanging fruit and instead help wider society get better financial resilience.
“The tension comes between profit and societal good, but they’re not mutually exclusive.”
Sarah Marks, CEO of RedSTART stressed that it’s people who are struggling financially that are at risk of being left behind.
She pointed out that only 40% of adults in the UK have over £1,500 in savings and it is these people that need help to prepare for the future.
Marks said: “They are the ones who are not supported because they don’t have as much value as a customer in the way that people with money do.
“That’s where the charity sector plays a big role, where there is a societal value, rather than a commercial one.”
Meanwhile, Gillian Hepburn, UK head of intermediary solutions at Schroders, pointed out that financial advice needs to be more accessible and that the bar is currently too high.
“Only 32% of advisers are currently prepared to help people with under £50,000 to invest – a number which is continually declining and is not a good place to be in.”
It’s a view supported by Helen Wardle, founder of Money Means.
She said: “It’s too late for people turning up at age 59 to ask for help, but there are no solutions for people younger than that or with relatively low wealth.
“As a result, we’re letting a whole heap of people down.”
According to the FCA, three in 10 adults (29% or 15.2m) in the UK received support about investments, saving into a pension or retirement planning in the 12 months to May 2022.
However, only 2% of adults with investible assets of less than £10,000 received regulated financial advice during that time, compared to 31% with more than £100,000.
Wardle added that the industry needs to reassess how it engages with consumers.
She added: “Financial services needs to innovate in a way that they haven’t before, in order to build this real connection with customers.
“Businesses who don’t have an edge about putting their customers first are going to struggle going forward, which should mean more inclusion in the next 10 years.”
Paul Chedzey, a financial wellbeing consultant agreed.
“For the financial services industry, it’s possible to help people spend their money better, but we need to come up with solutions to help people at the low end of money.
“In all areas, there needs to be innovation around products and making things easier for people, especially around the housing market to help people get on to the ladder.”
The group highlighted that firms have been constrained by compliance.
Wardle said: “We’re good at overcomplicating the help we provide by worrying about what’s guidance and what’s advice, but we should be able to tell people if they’re making a decision that isn’t ok instead of being scared about the repercussions.”
This is one of the areas where the FCA’s new Duty can potentially benefit consumers, according to Jobson.
He added: “Consumer Duty will help offer better value for customers, and here the advice part can fall into it, too, if it’s clear what the parameters are, so we can reassure companies that there isn’t a fallout in compliance terms of offering help.
“A clear framework will help companies stand up and offer simplified advice to more people.”
The panel felt this will also help the industry encourage people to take more risk with their money, something that is vitally important to building financial resilience.
Hepburn said: “We need to have hard conversations with people of the downside of not taking enough risk.”
This is crucial for helping people who don’t realise how far short they are of what they need for retirement, according to Marks.
She said: “This is a critical situation, with these people retiring in their millions in the years to come, so there needs to be a discussion about what happens when this group retires without enough money to live on.”
The solution, as far as Wardle is concerned, is building a coordinated response.
She added: “A collective process where advice is not just coming from one direction but is driven by the government and regulation as a joined effort can make a real difference.
“People are facing financial difficulty and challenges, but we need them to also take responsibility for dealing with it and give them the help they need to move forward.”