Tackling vulnerability and financial exclusion: When talk can be highly valuable
03 September 2019
Financial vulnerability and exclusion are widespread but often hidden problems. That’s why it’s so important that we get them out in the open and have a real conversation about the risks and how to tackle them.
While financial exclusion and vulnerability are nothing new, changes in society ranging from people living longer and the growing numbers of single-parent families to the prevalence of zero hours working and rising health risks, such as dementia, are making these issues both more pervasive and harder to address. At the same time, welfare systems are changing and people need to be equipped to take greater control of their financial lives. The role of financial services (FS) has thus never been more central to the financial wellbeing of our society.
As I discussed in a previous blog, “Tomorrow, today: Modernising financial services to serve future generations” the FCA is calling on FS firms to take a more purposeful approach. And with FS increasingly in the media, the benefits of greater transparency to support brand and reputation are clear.
Beyond FS’ role, what can we do as a society? The starting points are encouraging everyone to talk about money and engage with their financial lives – some do, but most don’t, which reinforces exclusion and vulnerability. The new Money and Pension Service, together with firms such as Citizens Advice and third sector charities (such as Relate, the Money and Mental Health Policy Institute, the Alzheimer’s Society, Age UK and Surviving Economic Abuse to name but a few) that offer support to those who are vulnerable, have vital roles to play, in collaboration with FS.
Many people today lack financial capability, not just those lacking financial resilience, rather whole cross-sections of society. With wellbeing approaches increasingly recognising the connections between financial and wider healthy wellbeing, the benefits of financial wellbeing are many. Building financial wellbeing into customer solutions and also rewarding people through incentives creates mutual benefits for firms and customers – for example, a financially capable borrower is less likely to default on loans, and a financially well health insurance customer is less likely to suffer wider wellness issues, for example mental health.
Employers can build financial inclusion and wellness into the HR cycle. The focus includes areas such as pensions enrolment on starting work or informing the impact on provision of changing to part-time, guidance and prompts on debt management, credit ratings, family saving and making ends meet, as well as informing those approaching retirement. Again, there are significant mutual benefits, with a financially well workforce translating into an engaged, loyal and high performing workforce. FS firms adopting these approaches will help staff be better equipped to serve customers. And partnership between employers and FS firms would be one of the most effective ways to build the necessary understanding, engagement and trust.
Financially engaged society is a healthier society
So, by encouraging people to be engaged in their financial lives and futures, we can help them to become more aware, included and resilient. FS firms have a clear role to play. But this is also a societal issue that requires understanding and involvement across the board, and through which we can all benefit.