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Promoting Education and Understanding in Financial Services - UKPublished by: Mintel International Group Ltd. Published: Dec. 1, 2006 - 118 Pages Table of ContentsThe Central Issue Abbreviations Report in Brief The need for improved levels of financial capability Developing a National Strategy Overview of Mintel’s findings: assessing people’s financial competency What they want to know more about How they view the availability and reliability of financial information and advice Who they consider to be their main financial services provider Which channels of communication they prefer Experience of seeking information and advice The next steps Background Financial capability: defining the problem Why is education so important? The comforting arm of the state is steadily being withdrawn Rising household debt is symptomatic of modern living Figure 1: Amount of household debt outstanding, secured and unsecured, 1993-2006 Shifting socio-demographics and lifestyles create new financial needs Figure 2: Changing social and demographic trends impacting on the financials services industry Ditto, changing work patterns Too much choice can leave consumers bewildered Loss of trust compounds the problem The Core Competencies The FSA’s Financial Capability Survey Mintel research supports the FSA’s findings Older and wiser Figure 3: Agreement with six statements about personal finance and managing money, by age group, May 2006 The Consumer 1 - Assessing Capability Survey background Men may be more confident, but women are perhaps more truthful Figure 4: Ability to describe specific financial products, by gender, September 2006 Financial understanding is determined partly by familiarity Figure 5: The relationship between financial capabily and product penetration and complexity 35-44-year-olds are the most confident at describing financial products… Figure 6: Ability to describe specific financial products, by age group, September 2006 …while Ds and Es require the greatest help Figure 7: Ability to describe specific financial products, by socio-economic group, September 2006 Regional variation in ability Figure 8: Ability to describe specific financial products, by region, September 2006 Life insurers need to raise awareness of the different cover types Figure 9: Cross-analysis - ability to describe specific financial products by ownership of product, September 2006 The more products people own, the greater their understanding Figure 10: Ability to describe specific financial products, by number of products owned, September 2006 Four in five adults admit to not knowing how the more complex financial products work Figure 11: Agreement with statements about financial capability, September 2006 An apparent contradiction exists… Figure 12: Agreement with statements about financial capability - cross-analysis, September 2006 …and is most noticeable among the 35-44 age group Figure 13: Agreement with statements about financial capability, by gender, age, socio-economic group and region, September 2006 Dissecting the sample according to level of financial capability Figure 14: Financial capability typologies, September 2006 The Financially Sophisticated believe in taking personal responsibility… Figure 15: Agreement with statements about financial capability, by financial capability typologies, September 2006 … and, not surprisingly, achieve the highest score Figure 16: Ability to describe specific financial products, by financial capability typologies, September 2006 A greater proportion of men than women are Financially Sophisticated Figure 17: Financial capability typologies, by gender, age, socio-economic group, marital status, lifestage and working status, September 2006 The Financially Illiterate tend to be young, single renters on low income Figure 18: Financial capability typologies, by tenure, gross annual household income, region and ACORN category, September 2006 A National Issue Taking the next step: The National Strategy for Financial Capability Learning money matters at school Helping young adults make sense of money Delivering education and advice through the workplace New parents need a single, comprehensive resource FSA’s new Consumer Communications Strategy Other developments The Consumer 2 - Filling the Knowledge Gaps Financial matters hold little fascination for most adults… Figure 19: Financial subjects people would like to know more about, September 2006 …although the desire to improve understanding is highest among the Financially Illiterate… Figure 20: Financial subjects people would like to know more about, by financial capability typologies, September 2006 … and most support personal finance being taught in schools Figure 21: Areas of finance that people think should be taught in schools, March 2004 Data variations reveal the need for a differentiated approach Figure 22: Financial subjects people would like to know more about, by gender, age and socio-economic group, September 2006 Financial needs change with lifestage Figure 23: Financial subjects people would like to know more about, by marital status, lifestage and working status, September 2006 The least affluent groups are most in need of money management advice… Figure 24: Financial subjects people would like to know more about, by tenure, gross annual household income, region and ACORN category, September 2006 …perhaps delivered via the popular tabloid press? Figure 25: Financial subjects people would like to know more about, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, September 2006 Demographic profile for each of the top four subject areas Consumers give the thumbs up to web-based information resources Figure 26: Preferred ways of receiving financial information and advice, September 2006 Those with lower financial capability need greater guidance Figure 27: Preferred ways of receiving financial information and advice, by subject of interest, September 2006 Men prefer web-based resources, while women prefer printed material Figure 28: Preferred ways of receiving financial information and advice, by gender, September 2006 Preferred advice delivery methods vary with age Figure 29: Preferred ways of receiving financial information and advice, by age group, September 2006 Figure 30: Top five preferred ways of receiving financial information and advice, by gender and age group, September 2006 Support for workplace activities is fairly even spread across the socio-economic spectrum Figure 31: Preferred ways of receiving financial information and advice, by socio-economic group, September 2006 TV programmes is the top choice for the Scots Figure 32: Preferred ways of receiving financial information and advice, by region, September 2006 The Consumer 3 - Accessing Information and Advice The most common sources of information and advice Making advice accessible for all Plenty of financial information if you know where to look, say two fifths of adults Figure 33: Agreement with statements about information and advice relating to long-term financial planning, by financial capability typologies, September 2006 Cluster analysis What is cluster analysis? Figure 34: Financial advice clusters, September 2006 Figure 35: Agreement with statements about information and advice relating to long-term financial planning, by financial advice clusters, September 2006 More than a quarter of the self-employed are Savvy Searchers Figure 36: Financial advice clusters, by gender, age, socio-economic group, marital status, lifestage and working status, September 2006 Nearly three fifths of those living in Hard Pressed neighbourhoods are Disconnected Figure 37: Financial advice clusters, by tenure, gross annual household income, region and ACORN category, September 2006 Waitrose has the highest proportion of ‘money-wise’ shoppers Figure 38: Financial advice clusters, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, September 2006 The Disconnected have the lowest product penetration Figure 39: Number of financial products owned and number able to describe, by financial advice clusters, September 2006 The Money-wise and Misdirected cluster has the highest financial capability score Figure 40: Ability to describe specific financial products, by financial advice clusters, September 2006 Financial Activists are keen to know more Figure 41: Financial subjects people would like to know more about, by financial advice clusters, September 2006 Corporate Initiatives Figure 42: Types of corporate initiatives to improve financial capability Educational programmes School branches Sponsorship and charitable donations Norwich Union - Making sense of investments The Consumer 4 - Dealings With Main Provider The Big Five Banks top the ‘main financial provider’ rankings Figure 43: Top ten financial services providers, by financial capability typologies, September 2006 HSBC customers are the most financially astute Figure 44: Number of financial products and number able to describe, by main provider, September 2006 Customer profiles of the main financial services providers Figure 45: Customer profiles of the main financial services providers, by gender, age, socio-economic status and region, September 2006 Where there’s interest, there’s a sales opportunity Figure 46: Financial subjects people would like to know more about, by main provider, September 2006 HSBC customers are most keen on in-branch one-to-one consultations Figure 47: Preferred ways of receiving financial information and advice, by main provider, September 2006 Certain issues are more pertinent to certain groups of customers Figure 48: Agreement with statements about information and advice relating to long-term financial planning, by main provider, September 2006 The local branch remains a firm favourite among advice seekers Figure 49: Agreement with statements about access to information and advice, by top five providers, September 2006 Alliance & Leicester has the most satisfied and loyal customers Figure 50: Agreement with statements about access to information and advice, by other financial services providers, September 2006 Further analysis Where Next? A long-term commitment Workplace programme to expand Online resources will continue to prove popular Money advice to top the agenda in 2007 AbstractFinancial capability is becoming increasingly important with ever more complex product options available to consumers, and given the potential negative consequences of a wrong decision. Successive mis-selling scandals have underlined the need for individuals to have at least some understanding of the financial products that they buy and of the potential risks attached to their choices. Scope of the report Drawing on a comprehensive range of information and statistical sources, this report offers readers:
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