This article sets out to answer four questions:
1. Why is financial wellbeing important?
2. What is the purpose of the Single Financial Guidance Body (SFGB)?
3. What are the next steps for the SFGB?
4. How can you help?
Why is financial wellbeing so important?
It is important because it is central to personal wellbeing and thus to living a contented life.
Furthermore, it is clear that our state of financial wellbeing is not good. Two facts illustrate that: There are 52 million adults in this country of which 9 million are in problem debt, and 11 million do not even have £100 in savings. If there were this number of people with a specific physical or mental health issue this would be a national scandal. I would suggest this is of the same importance. What is the purpose of the Single Financial Guidance Body? Our parliamentary mandate means we have a clear vision: “A society where everyone makes the most of their money and pensions.” Achieving this would transform society. Of course, it is not a complete solution to financial wellbeing as those who just do not have enough will struggle even if they are financially capable, but achieving the vision of the SFGB would still, in itself be, a significant step forward. The vision may be clear, but we have much work to do to be sure of the best way forward or, in formal terms, to articulate a clear achievable strategy. We do, however, already have an understanding of the high-level objectives for the next five years, namely:
‘Raise awareness’ of the importance of financial wellbeing.
- Establish the importance of financial wellbeing as a top priority for policy makers and raise its awareness in society to a level comparable to that of mental and physical health.
Significantly increase capacity to remediate financial distress: ‘help the vulnerable’ through:
- Focusing our remediation to ensure there is free help available for all those who fall into problem debt
- Ensuring all those who need pension guidance receive it
- Working to ensure that those individuals where financial distress impacts their mental and physical health are helped.
‘Establish a credible National Strategy’ to achieve our vision of a society where every adult makes the most of their money and pensions.
This requires a credible Financial Capability Strategy to equip adults with the necessary skills to manage their money and pensions. This focus on financial capability is a shift in approach from that of our previous organisations, with an increased emphasis on prevention rather than remediation. Prevention requires individuals:
- To be financially educated
- To be equipped with the necessary tools, guidance and advice
- To have access to the necessary services which should be both affordable and ethical
- To have the right behavioural attitude to money.
The last point is crucial to achieving the strategy. Currently, the issue of shame about problem debt and poor financial decision making, and the lack of individuals’ willingness to engage with money matters, are significant barriers to progress.
Traditionally, money issues are engaged with only when events require it, for example, when individuals lose their jobs, suffer ill health or more positively get married or have children. The willingness of individuals to consider their financial circumstances needs to move from being transactional, event driven, to being an everyday consideration (something we intuitively think about).
Our final objective is an internal one; ‘establish an efficient, sustainable and respected organisation’
If our high level goals are clear, what are our next steps?
The current challenge is to articulate a medium-term strategy. We intend to do that between now and the Autumn of 2019 by engaging with stakeholders across the country through a ‘listening exercise’ followed by the publication of our conclusions. In essence, therefore, we see 2019/20 as a set-up and listening year, a transitional year, with 2020/21 being our first year based on our own strategy.
Our autumn publication will have two components.
Firstly, a national strategy to create the building blocks to deliver a financially capable nation. This is a long-term endeavour and its success will depend on the active support of all. and, secondly, a three year SFGB business plan; setting out the specific activities and goals for which the SFGB will be directly accountable.
The focus for the SFGB is thus two fold:
- To create and lead the delivery of the national strategy, and
- To deliver either directly or via commissioning help principally to the most vulnerable. Examples of that being those in debt and those facing key financial decisions, for example with regard to retirement and pensions.
We should not forget, however, that in money matters everyone is potentially vulnerable. Thus, the SFGB will also seek to ensure we are all equipped to make good decisions. We will, however, only succeed in partnership with industry; which leads takes me to the last question.
How can you help?
We clearly need ideas, support and funding. However, we also need enthusiasm and a willingness to recognise we have common goals and to work together to achieve them. The SFGB will look to partner with industry with two key objectives:
Firstly, to ensure the best possible outcome for individuals making financial decisions; equipping people to be financially capable, providing guidance and advice should be seen as a continuum, with any SFGB interventions having the intention of helping the customer to get the most out of the subsequent regulated advice.
Secondly, to work with everyone to restore trust in the system. This issue of restoring trust is critical; of course the industry’s service must justify it, but the industry should also expect the rest of us involved in the process to help in changing the tone of the public discourse when it is merited.
In summary, financial wellbeing matters and changing it requires the collective endeavour of all concerned. This article is based on the talk by Sir Hector Sants at the PMI Annual Conference ‘Pensions Aspects Live’, 3rd April 2019.
* Please note it has been announced, and subject to parliamentary approval, on 6th April, SFGB will be renamed Money & Pensions Service.
Chair – Money & Pensions Service (Previously, Single Financial Guidance Body)