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Financial Capability - UK - September 2016

“Engaging consumers early and making it easy for them to develop good habits and pick up knowledge is key to raising financial capability. Developments such as the introduction of compulsory financial education and the launch of the UK Financial Capability Strategy have put financial capability at the heart of strategy decisions in both the public and private spheres. As consumers are being forced to take more responsibility for their personal finances, financial services providers cannot afford to ignore financial capability issues as they seek to deliver more services directly to consumers.”
– Rich Shepherd, Senior Financial Services Analyst

This report examines the following issues:

  • Consumers see opportunities for advice, but need to be convinced
  • Making finance fun can be hard, but interest is a key part of capability
  • Compulsory education should produce a more capable population

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Financial capability is a priority for public and private institutions
            • The consumer
              • Consumers can deal with today, but future needs are trickier
                • Figure 1: Consumer confidence in managing personal finances, May 2016
              • Confidence is lowest in adviser-dominated markets
                • Figure 2: Consumer confidence in choosing financial services products, May 2016
              • Most people are not confident about evaluating financial advice
                • Figure 3: Consumer confidence in finding and evaluating advice and guidance services, May 2016
              • Money management isn’t enjoyed by many, but only a few hate it
                • Figure 4: Approach to managing finances, May 2016
              • Informal sources have the most impact on people’s approach to finance
                • Figure 5: Major influences on approach to personal finances, May 2016
              • Expert assistance is still needed in many markets
                • Figure 6: Confidence in arranging financial products without advice/guidance, May 2016
              • What we think
              • Issues and Insights

                • Consumers see opportunities for advice, but need to be convinced
                  • The facts
                    • The implications
                      • Making finance fun can be hard, but interest is a key part of capability
                        • The facts
                          • The implications
                            • Compulsory education should produce a more capable population
                              • The facts
                                • The implications
                                • The Financial Capability Environment – What You Need to Know

                                  • Financial education for all
                                    • High street banks take responsibility with private initiatives
                                      • Mobile channels and the rise of PCWs
                                        • The Money Advice Service to be slimmed down
                                        • The Financial Capability Environment

                                          • Financial education on the National Curriculum
                                            • Bank initiatives
                                              • Barclays
                                                • RBS
                                                  • Lloyds
                                                    • Santander
                                                      • Digital tools
                                                        • The rise of price comparison websites
                                                          • Third-party account aggregators set for expansion
                                                            • B targets a young customer base with budgeting assistance
                                                              • Charities and official organisations
                                                                • Money Advice Service to be slimmed down
                                                                  • The UK Financial Capability Strategy: a path to a more financially capable population?
                                                                    • Pension Wise
                                                                    • The Consumer – What You Need to Know

                                                                      • Consumers can deal with today, but future needs are trickier
                                                                        • Confidence is lowest in adviser-dominated markets
                                                                          • Most people are not confident about evaluating financial advice
                                                                            • Money management isn’t enjoyed by many, but fewer hate it
                                                                              • Informal sources have the most impact on people’s approach to finance
                                                                                • Expert assistance is still needed in many markets
                                                                                • Consumer Confidence in Money Management

                                                                                  • Almost everyone is confident in keeping on top of bills
                                                                                      • Figure 7: Consumer confidence in managing personal finances, May 2016
                                                                                    • Student banking could improve young adults’ financial capability
                                                                                      • Vulnerable customers are the least likely to plan a budget
                                                                                        • Confidence is lower when providing for future needs
                                                                                        • Consumer Confidence in Choice of Products and Services

                                                                                          • Most people are confident choosing day-to-day financial products
                                                                                              • Figure 8: Consumer confidence in choosing financial services products, May 2016
                                                                                              • Figure 9: Consumer confidence in choosing financial services products, Rebase, May 2016
                                                                                            • The stock market is a mystery to many
                                                                                              • The need for pension guidance is clear
                                                                                              • Consumer Confidence in Finding and Evaluating Advice and Guidance Services

                                                                                                • Most people feel they know where to look for help managing their money…
                                                                                                    • Figure 10: Consumer confidence in finding and evaluating advice and guidance services, May 2016
                                                                                                  • …but confidence in evaluating advice is much rarer
                                                                                                  • Approach to Managing Finances

                                                                                                    • A minority are enthusiastic about managing their finances
                                                                                                      • Managing finances is a chore for most people…
                                                                                                        • Figure 11: Approach to managing finances, May 2016
                                                                                                      • …but only very few hate it
                                                                                                        • Figure 12: Approach to managing finances, by financial situation, May 2016
                                                                                                      • User-friendly apps can raise enjoyment and confidence levels
                                                                                                        • Figure 13: Confidence* in ability to stick to a household budget, by approach to managing finances, May 2016
                                                                                                    • Financial Influences

                                                                                                      • Could poor financial education be holding people back?
                                                                                                          • Figure 14: Major influences on approach to personal finances, May 2016
                                                                                                        • Family lessons are key for young consumers
                                                                                                          • Figure 15: Consumers who identified parents as having influenced their approach to managing their money, by age, May 2016
                                                                                                        • The media: a powerful tool, but ignored by many
                                                                                                          • Figure 16: Major influences on approach to personal finances, by approach to managing finances, May 2016
                                                                                                        • Banks can be more influential in helping vulnerable customers
                                                                                                        • Arranging Financial Products

                                                                                                          • Confidence abounds in everyday product purchases…
                                                                                                            • Figure 17: Confidence in arranging financial products without advice/guidance, May 2016
                                                                                                          • …but there is a clear demand for expert assistance
                                                                                                            • Identifying a need, or putting people off?
                                                                                                            • Suitable Strategies: How Confidence Can Impact Financial Capability

                                                                                                              • Suitable Strategies
                                                                                                                • The confidence/capability relationship
                                                                                                                  • Confidence declines with age
                                                                                                                    • Figure 18: Mean confidence score, by age, July 2015
                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                    • Abbreviations
                                                                                                                      • Consumer research methodology

                                                                                                                      Companies Covered

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                                                                                                                      Financial Capability - UK - September 2016

                                                                                                                      US $2,842.31 (Excl.Tax)