A call for financial services to better serve households
According to a new report from GlobalData Financial Services, financial institutions need to work harder on advising customers, as well as designing and package more targeted propositions for households
Product design and financial advice are lacking for consumers at every stage of life. Propositions need to target life stages, from advice on how to save to buy a house, right through to retirement and minimising the impact of inheritance tax.
Opportunities exist for all financial services players to enhance and develop propositions that fit consumers’ needs. This is relevant across all areas, whether it is savings or investment products, bank accounts, or protection insurance.
No longer should consumers be analysed on an individual basis. Instead they should be targeted with financial services based on their life stage and households, as individuals are rarely financially independent. Often they will have a partner, children, or parents with whom their finances and needs are linked.
It is crucial to understand the lifestyles and finances of families and households to understand their protection needs and how to target them.
All have different financial goals, concerns, and situations. Products should be marketed to appeal to and address these. Consumers must be understood holistically.
Lack of awareness
There are many existing financial products that can already serve customers well; however, they may either not be packaged effectively, or there is a lack of awareness and education around them.
For example an investment product could be marketed specifically for those saving for a house, or income protection could be marketed for renters. This easily highlights to customers that a product is relevant to them.
Financial products must acknowledge and appeal to the changing needs and lifestyles of consumers over time, for example through flexible life insurance that can be adapted at key life stage transitions such as buying a house, having children, or retiring. There needs to be a greater focus on serving customers over the long term.
The industry also needs to work on improving customer engagement with financial services and building financial resilience.
Individuals must believe they can influence their finances, and they need to be given the tools, education, and advice to know how. Advisers must additionally do more to understand a customer’s needs and assess which products will be most relevant and beneficial.
The financial services industry needs to work together. For example banks and advisers could help customers in their goal to buy a house, and then work with insurers to sell protection when they get a mortgage.
Working together will help serve customers holistically across all products such as savings, investments, lending, and protection insurance. Serving customers better from all angles will help customers achieve greater financial resilience.
There are 26.7 million families in the UK who could be better served. There is a great opportunity for the financial services industry to see the holistic customer and put this into action.
However, the families can vary wildly. 28.9% are adults living alone, 30.3% are married or cohabiting couples with no children and 29.9%, or eight million, are families with dependent children.
Even within this eight million lies variation. 22.3% are lone parent families. 45.1% of families with dependent children had one child, 39.9% has two and 15% had three or more. With all of these different family types present in the market, financial institutions need to work harder to develop products that are more specific and personalised.
Current accounts, savings accounts, and credit cards are the most common financial products held. This is expected as these are the main ways in which people store and manage their money. 57.5% of individuals also have a private pension.
Most of the people surveyed have under £2,000 in their current account, which is around the average monthly salary. Current accounts have low interest rates and few benefits, and so individuals do not usually store all of their money in these accounts. Instead they will transfer spare funds to savings accounts that can give better returns, but still allow easy accessibility to money. Most have less than £10,000 stored in savings accounts.