Today, IFA Magazine is celebrating World Mental Health Day by featuring expert comment from across the financial services spectrum. Arguing that technology is going to be a key driver towards better mental and financial wellbeing in the UK, Nick Hall(pictured), Business Development Director, Wealth Wizards, shares his thoughts with us in the following blog:
Mental wellbeing is critical to a healthy, happy life, and there is clear evidence that our financial wellbeing impacts it. For example, confusion or lack of understanding around our finances is a critical contributor to mental anxiety. Conversely, having the confidence to make better financial decisions is documented to lead to better psychological and physical wellbeing – all three work hand-in-hand.
The UK cost-of-living crisis is making it more critical than ever for people to take action to understand their finances.
There have been reports of people stopping their pension payments or raiding their pension pots to meet their standard of living costs. Last week, the FCA published their latest Retirement Income Market Data report*. It revealed that people have been withdrawing money from their pensions pots in far greater numbers (up by 18% from March 2022). While 40% of pensioners are on a Drawdown rate of 8%, a rate of decumulation considered unsustainable in current markets. Many people are making these decisions without any financial guidance or advice.
We may suppose that vulnerable consumers are predominantly those at risk of poor financial wellbeing. However, poor financial wellbeing may also impact those not considered ‘vulnerable’. Retirement planning, saving, investment and estate planning decisions may cause anxiety and feelings of not being in control of our finances. Unfortunately, this is further exacerbated by financial services legislation and the myriad of available products and services.
Wealth Wizards believes that financial technology may be the best, if not the only, way to support the large number of people who need to improve their financial wellbeing. Increased engagement with platforms that deliver helpful, user-friendly, jargon-free material builds knowledge, confidence, our financial wellness and in turn, our mental health.
Imagine as a consumer going on to the website of a trusted brand, which securely takes you on a secured journey to assess your financial situation. Sharing your financial situation in your own time and space can feel less intrusive or intimidating than sharing it with a stranger.
Upon reaching the end of this journey, you receive professional input, which empowers you to make an informed decision. You may need options on debt management or budgeting, retirement planning, saving or investing. Such a tool, accessible to many, would likely improve one’s financial and mental health.
Suppose we equipped financial service providers with technology that ‘codifies’ (automates) their financial expertise. How much more could we do to improve our nation’s financial and mental wellbeing.
Codification, through consistent and compliant financial guidance and advice, can assist more significant numbers than currently is possible through qualified individuals. It makes the resource affordable and accessible to more people, thereby improving financial and mental wellbeing faster. It also eliminates the barrier to entry as it can be made available to people of varying incomes and assets. And it is available when it is most convenient to the consumer, which improves engagement.
Life assurers and banks have already employed the financial guidance model to help people make better-informed decisions around retirement.
Financial advice firms also can also employ a digital journey during traditional onboarding and if required, introduce an adviser later. Such a process would improve efficiency, lessen associated costs and be available at the client’s convenience.
The current UK cost of living crisis, coupled with ‘the advice gap’ is undoubtedly impeding our finances and mental health. So helping consumers in their financial decision-making may never have been more critical.
Employing technology will not happen overnight, but it can help now and in the future. The improvements to mental health resulting from greater financial wellbeing should motivate us all to find ways to make financial advice affordable and accessible to all.