Report on the FCA's Financial Lives survey

By Ryan Smith on September 6, 2018

Lead Tech reports on the FCA's 2018 Financial Lives survey and what it means for financial advisers.

In 2017, the Financial Conduct Authority (FCA) released a comprehensive report on the financial lives of adults aged 18 and over all across the UK. The results were based on roughly 13,000 in-person and online interviews conducted between December 2016 and April 2017 and represents the largest-ever survey designed by the FCA to track the financial wellbeing of UK consumers.

The goal of the survey is to give FCA officials a keen insight into how people interact with retail financial services offerings. The organisation hopes that these results will help them better meet their consumer protection objectives and will provide industry stakeholders with crucial information about the consumer experience.

So far, the FCA has released two different reports based on information obtained through the survey. The first analyses how age influences consumer financial habits, while the second looks more closely at geographic factors.

Highlights of the FCA report

There is a lot of data contained in the FCA report, but these are a few of the key highlights.

On traditional banking:

  • Only 16% of adults say they are highly knowledgeable about finances.
  • Roughly 3% of adults in the UK do not use traditional banking services, including checking or savings accounts, investment products or financial planning help.
  • Nearly 13% of seniors over the age of 55 and younger people with chronic health conditions report difficulty getting to a bank.

On debt and credit card spending:

  • Approximately 3.1 million people across the country carry the burden of high-cost loans.
  • A surprising 27% of adults in urban areas have overdrawn their spending accounts at least once in the past year.
  • Less surprisingly, 20% of urban adults and 14% of rural adults do not pay off their credit card balances each month.
  • About 15% of consumers nationwide report an overabundance of debt.
  • More than 4 million people describe themselves as “in financial difficulty” because of late or missing bill payments or consumer debt.
  • A troubling 23% of Londoners say their mortgage debt is at least four times the amount of their total household income.

On retirement planning and savings:

  • More than 30% of consumers have no private pension.
  • Approximately 16% of non-retirees over the age of 45 say they haven’t thought about how they’ll manage their finances after retirement.
  • About 57% of respondents have absolutely no cash savings or savings less than £5,000.
  • Seven out of ten (71%) adults nationwide do not have any investment portfolio whatsoever.

On financial advice clients:

  • In the last year, 23% of adults have received unsolicited and potentially suspicious communication about pensions or financial planning help.
  • Just 6% of respondents say they’ve used regulated financial advice in the past year.
  • Only 39% of adults across the UK say they trust financial advisers to make decisions in a client’s best interest.

Age and financial health

Upon its initial publication, the FCA Financial Lives survey included a detailed report exploring how the age of survey respondents influenced data outcomes. The survey identified six different age groups in an attempt to show how consumers respond to financial matters at several crucial life stages.

Some key findings include:

  • About 25.6 million adults in the UK may be financially vulnerable. As a person’s age increased, so did their risk of financial harm, and the highest number of vulnerable people were those without a traditional bank account and those currently unemployed and looking for work.
  • Women are more likely to be financially vulnerable than men.
  • Young single parents aged 18-34 are far more likely to obtain high-cost loans than the average UK adult.
  • About 13% of young adults aged 25-34 have missed bill payments or credit repayment obligations in at least three of the last six months.
  • Only 35% of older adults aged 45-54 say they’ve thought seriously about how they’ll manage financially after retirement.

Geography and financial health

The latest survey analysis reveals significant differences between how people in urban and rural areas handle their finances. Respondents were grouped by geographic region covering all of Great Britain, Northern Ireland, Scotland and Wales.

A few of the major takeaways include:

  • People living in rural areas are often more reliant on local bank branches and may not have access to online banking, yet are more likely to be pleased with their financial situation overall.
  • People in urban areas are more likely to have lots of unsecured debt and high-cost loans – many report dissatisfactions with their overall financial circumstances.
  • Only 23% of people in rural areas use mobile or online banking services, compared to about 45% of people living in urban centres.
  • Adults in urban areas carry an average of £3,600 in unsecured debt, while the average is roughly £2,510 for adults in rural areas.
  • More than half of retired adults in rural areas depend on the State Pension as their main source of income.

What can we learn?

As financial advice lead providers, and to financial advisers, the results of the FCA report are likely not to be shocking, but the numbers may be surprising. One of the main overall takeaways is that adults of all ages across the nation are putting themselves at risk financially by racking up lots of unsecured debt, obtaining high-cost loans, skipping bill payments, failing to adequately save and not planning sufficiently – or at all – for retirement. There is also a significant percentage of the population that have either been scammed by bogus IFAs, are sceptical of the value of professional financial investment advice, or who may not understand what a financial adviser can do for them.

Reaching these people can be a challenge, but it’s clear that with the right approach, there are plenty of opportunities to help consumers improve their financial lives, protect their assets, grow their wealth and better plan for the future.

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