Generally speaking, I’m a pretty positive guy but I’m not ashamed to say that there have been periods over the past 12 months which have really tested me. I don’t think I’m alone in feeling this and I certainly don’t want any sympathy as I feel like I’m in somewhat of a privileged position compared to many people who have suffered far worse that me.
As important as recognising your own issues, is realising the plight of others. For advisers, this means supporting clients with their ongoing financial concerns. Now I’m no expert, but I think it’s fair to say that there are often links between financial and mental health. And we, as a sector and as a society, can’t ignore the needs of people who are suffering from a change in their employment status, loss of income or rising debts which have arisen because of a situation way beyond their control.
We are in the midst of a period which has heightened the need to gain an even better understanding of people’s ever-changing circumstances and greater transparency when it comes to our financial health and wellbeing. With this in mind, it was interesting to read the FCA’s latest ‘Financial Lives’ survey (FLS) which focused on consumers’ financial situations, the financial products they choose and their experiences of engaging with financial services firms. The FCA concluded its FLS research in February 2020 and ran an extra survey in October in order to understand the impact of the Covid-19 pandemic on the financial situation of consumers.
According to the October survey, there are now 27.7 million adults in the UK with characteristics of vulnerability such as poor health, low financial resilience or recent negative life events. This figure is up 15% since the FCA completed its FLS in February when 24 million displayed characteristics of vulnerability. The FCA found that the number of consumers with low financial resilience – meaning over-indebtedness, low levels of savings or low or erratic earnings – has grown. Over the course of 2020, the number of UK adults with low financial resilience increased from 10.7 million to 14.2 million.
When highlighting the threat to people’s incomes from the pandemic, October saw one in three adults suggest that they expected their household income to fall during the next six months, whilst a quarter 25% expected to struggle to make ends meet. To cope with the hardships they expected to face, many adults reported that they were likely to cut back on essentials (33%) or to use a food bank (11%); 8.1 million (16%) expected to take on more debt.
However, the research also found that 48% of adults have not been affected financially by Covid-19, and 14% have actually seen an improvement in their financial situation. Over the course of the pandemic, the FCA has worked with the financial sector and consumer bodies to help protect consumers with measures such as mortgage and credit payment deferrals. One in six mortgage holders have taken up a mortgage payment deferral and 40% of them reporting they would have struggled a lot without such measures.
It’s always been difficult for intermediaries to keep fully up to date on every turn in the financial road for their clients, although these have risen in frequency and even transitioned into hairpin bends on occasion. Meaning it’s more important than ever for intermediaries to integrate the types of online tools which can offer clients easier access to – and better control over – their finances into the advice process.
David Jones is director of Click2Check