Reassessing Consumer Financial Guidance Amidst a Cost of Living Crisis

In recent surveys, notably by Handelsbanken Wealth and Asset Management, it has emerged that a significant portion of the UK adult population harbours deep concerns about their financial future. The data indicates that 46% of UK adults fear a declining standard of living over the next 12 months, with this apprehension most acute among those in their 30s. Women, in particular, are more worried about external financial risks than men, reflecting broader societal concerns about economic stability amid soaring living costs and inflation pressures.

However, the response from traditional financial sectors—namely bankers and wealth managers—often gravitates towards promoting their products such as pensions, insurance, and investments as panaceas. This approach not only overlooks the immediate financial pressures people face but potentially exacerbates them by diverting already limited personal funds into channels that do not directly address their most pressing needs: more disposable income and reduced outgoings.

The reality of the situation calls for a pivot in financial advisory services towards more holistic financial planning. Holistic financial planners, unlike product-focused intermediaries, do not handle client money directly for product investments but instead offer tailored generic financial planning advice that encompasses all aspects of a client’s financial health. This approach enables individuals to enhance their financial inflow and manage expenditures more effectively—critical interventions in times of economic uncertainty.

Yet, the dominant voices in the financial advisory landscape are those with the deepest pockets—those who control client money and, by extension, wield substantial marketing budgets to influence consumer behaviour. This disproportionate voice in the financial narrative is not just a market distortion but a serious ethical concern. The misuse of client funds for aggressive advertising campaigns underlines the need for stricter regulatory oversight, particularly concerning the use of client money for marketing purposes. This would ensure that financial advice serves the best interests of the consumer, not the profit margins of the intermediaries.

In this context, consumer duty regulations must evolve to put a leash on the unchecked use of client funds for marketing. Such funds should be safeguarded to ensure they serve the client’s best interests, rather than being seen as a bottomless pit for funding corporate advertising. This shift would help level the playing field for holistic planners and financial counsellors, whose more subdued marketing capabilities reflect their focus on client-centric advice over product sales.

The data and trends are clear: as individuals navigate the complexities of the current financial landscape, they need advisers who can genuinely advocate for their financial well-being without the conflict of interest posed by product-based fees. It’s time for a regulatory recalibration to ensure that financial advice truly aligns with the needs and aspirations of consumers, particularly in these challenging economic times.

Questions & Answers

Q1: What percentage of UK adults are concerned about their standard of living declining in the next year?

A1: According to research by Handelsbanken Wealth and Asset Management, 46% of UK adults are worried that their standard of living will fall over the next 12 months.

Q2: Are there any demographic groups more worried about their financial futures than others?

A2: Yes, the concern varies by age and gender. The research found that 55% of people in their 30s are particularly worried, compared to 38% of those over 50. Additionally, women are generally more concerned about external risks to their finances than men.

Q3: Why do traditional financial products not necessarily address the current economic concerns of consumers?

A3: Traditional financial products, such as pensions, insurance, and investments, often require upfront financial commitments. During times of economic uncertainty and rising living costs, these products can strain consumers’ budgets further instead of providing immediate relief or improving cash flow.

Q4: What is holistic financial planning, and how does it differ from traditional financial advice?

A4: Holistic financial planning considers all aspects of a person’s financial situation, focusing on increasing disposable income and managing expenditures, rather than just pushing financial products. This approach does not involve selling products but providing generic financial planning advice that helps individuals make informed decisions based on their entire financial health.

Q5: What concerns are raised about the use of client money in financial marketing?

A5: The article raises concerns that some financial institutions may misuse client funds for extensive marketing campaigns, which primarily serve the interests of the institutions rather than the clients. This practice can undermine trust and distract from more client-focused financial advice.

Q6: How could consumer duty regulations help address the issues with current financial marketing practices?

A6: Tighter consumer duty regulations could restrict the use of client funds for marketing, ensuring that such funds are used to benefit clients directly. This would help level the playing field for generic financial planning advisers who prioritise holistic planning and client well-being over product sales.

These Q&A entries aim to clarify key points and provide further insight into the shifts needed in financial advisory services to better serve consumers in the current economic climate.