Financial advice has a significant role to play in mitigating the impact of vulnerability on financial decision-making, but taboos around vulnerability deter more than half of clients from discussing additional support needs with their adviser, according to a new study by St. James’s Place (SJP).
The fourth chapter of SJP’s Real Life Advice Report, launching today, highlights both the role of financial advice in supporting clients identified as having characteristics of vulnerability, and the ongoing barriers and improvements the industry needs to address moving forward.
The study, which surveyed just under 12,000 individuals, demonstrates the value of financial advice when life becomes more challenging. As many as 2.5 million UK adults sought out financial advice in the first place because of unexpected life challenges, with 31% of those receiving ongoing financial advice citing circumstances that can increase the risk of financial vulnerability as their main reasons for seeking support:
o Bereavement – 10%
o Ageing parents – 9%
o Caring for loved ones – 9% o Serious illness – 8%
o Becoming a single parent – 8%
o Divorce – 7%
Overall, 1 in 4 of those receiving financial advice has made them feel less vulnerable (25%), a third (33%) feel more confident, while 26% feel less stressed. In addition, 9 in 10 (92%) say seeking advice has benefited them mentally and emotionally.
Many others say that building financial resilience, which can play an important role in mitigating vulnerability, has been a key benefit of ongoing advice, with 22% saying they feel they now have adequate protection in place, 15% feeling able to cover the money required for health-related issues, and 18% feeling able to pay for any unexpected expenses.
Anna Blake, Chair of the Vulnerable Clients Steering Group, St. James’s Place, said: “Throughout a lifetime, many people will face events and challenges that can increase their risk of financial vulnerability. However, this doesn’t have to dictate their financial future. By seeking informed advice, prioritising mental health, and building resilience, our research shows they can navigate more difficult times with greater confidence.”
However, SJP’s study found that reticence to start conversations and lack of awareness of the support available are significant barriers which may be putting off others from seeking the right support for their circumstances. Research found that more than half (52%) of those who have received some form of financial advice state they would be unlikely to discuss additional support needs with their adviser.
Moreover, whilst a lot of good work is taking place across the industry, the research highlights the continued work that still needs to be done to address vulnerability. Of those receiving some form of advice:
o 1 in 5 (18%) say that little additional help or support was offered when they needed it.
o 15% were simply directed towards charities of similar organisations.
o Only 14% have been offered additional support that they weren’t previously aware was available. This increases to 1 in 4 (23%) among those receiving ongoing advice.
Blake continued: “Our research highlights how we must continue to reshape the dialogue around vulnerable clients. Whilst advisers across the country have been supporting their clients through all circumstances and scenarios over many years, the industry’s understanding of vulnerability, how to identify it in the first place, and how to provide clients with appropriate support, is evolving rapidly. Heading this drive at SJP, I’ve seen a three-fold increase in the number of clients being identified as having characteristics of vulnerability since July 2020, and
“I’m sure others in the industry are seeing similar trends as we all focus on improving our understanding and strengthening the processes and approach that underpin the support we provide. But there is clearly more to do.
“As an industry we need to get better at communicating the value we can offer and come together to address our gaps, share best practice and champion our strengths. If we do so, we have an opportunity to make a real difference and demonstrate more clearly how advice is a force for good in supporting all clients at risk of vulnerability.”
Above the clear guidance from the regulator around what is expected of firms, SJP has outlined five key areas of focus to ensure people receive the additional support they require:
1. Creating more debate around language: The term vulnerability is a label that people don’t walk towards easily and, in many ways, it does not help to illustrate the fundamental point that everybody is at risk of becoming vulnerable at some point in their life. SJP is currently undertaking a body of work around how we phrase questions and prompts to unearth challenges and vulnerabilities in a different way.
2. Sharing industry best practice: No one firm has all the answers, so creating a forum for shared knowledge is vital as this will enable innovation as an industry to ensure good outcomes for every vulnerable client. Coming together more to share learnings and best practice across the industry is in everyone’s interest.
3. Embedding across colleagues: Arming every adviser with the tools, training and support they need is a given, but we need to embed understanding into every corner of our businesses if we are to dispel myths around vulnerability. Mandatory training for all colleagues is an important step in this, but using initiatives such as national awareness campaigns, tools such as expert masterclasses, and alternative resources, such as podcasts, can bring the subject to life in a more impactful way.
4. Harnessing technology: Technology has a growing role to play in leaving no client behind. The likes of online assessment and guidance tools can really help advisers both identify and support vulnerable clients. The introduction of AI voice analytics into contact centres is an exciting development in adding a different perspective in how we spot clients in vulnerable situations more easily and technology will enhance our work as an industry to tackle this issue.
5. Building better Financial Resilience: Finally, advice has a significant role to play in mitigating the impact of vulnerability on financial decision-making by building better resilience in the first place. Our research earlier this year showed that, despite the cost-of-living crisis, 76% of those with a financial plan in place were confident in their financial position and 54% described themselves as financially comfortable compared to 34% who do not have a plan. Putting the fundamentals of sound financial planning in place reduces the urge to make impulsive financial decisions during crises and, as an industry, we must work together to champion this.
St. James’s Place’s Real Life Advice Report explores the benefits of accessing financial advice or guidance through diverse real-life stories from its advisers and clients. The report, released in a series of chapters, aims to highlight how financial advice and guidance can benefit everyone.
Opinium surveyed just under 12,000 UK adults between May and August 2024. Quotas and post-weighting were applied to the sample to make the dataset representative of the UK adult population.
