A few weeks ago a survey by the FCA, entitled “Understanding the financial lives of UK adults” landed on my desk. In her foreword, Jo Hill stated that “Understanding consumer needs is a key factor in the way we make regulatory judgements.” The survey follows the publication of “Our Mission 2017” by the FCA in April.

As much of the grey areas of compliance require the finance provider to act in a reasonable manner and the FCA is reluctant to give definitive guidance as to what “reasonable” means, it’s important to try to understand the regulator’s mind-set.

I’ve picked up some data which I think is of interest.

18-24 year olds are the least confident about managing their money and the least knowledgeable about financial matters compared with other age groups. In the age of increasing use of the internet to make financial decisions, this is worrying given in the future people will need to be more financially astute. Interestingly, only 36% are currently happy to get advice online. 44% do not have confidence in the financial service industry and thus opt for the recognised mainstream providers. This makes the role and integrity of brokers essential in ensuring that the choices made are the best possible.

What is also worrying is that this age group tend to use credit card facilities to tide them over. In addition, many student loans are not yet repayable. The interest rate on these loans is high. This will affect them adversely if they are seeking mortgage finance later.

25-34 year olds are most likely to be in financial difficulty (13%) and t be over-indebted (23%) in comparison to other age groups. Housing (un)affordability issues have led to Generation Rent. Only 42% own a home, despite the fact that 59% are co-habiting.

Credit card debt (44% have a revolving balance) and student loans are significant financial issues for this age group 35% are just about surviving.

This group are most likely to use online advice and use technology and generally distrust financial services companies. 35-44 year olds are big holders of life and health-related financial products. They have higher than average household income (£56,000 compared to £46,000 for all UK adults) but 21% are over-indebted with 31% just surviving. For many, the mortgage is the dominant financial issue with 56% having a residential mortgage. There are signs of financial pressure, especially with the prospect of increased interest rates. The survey shows that 13% would struggle with an increase of up to £100. Scarily, 52% of renters would find difficulty coping with a similar increase.

This group are more focussed on current financial needs, with family their main priority.

45-54 year olds have fairly similar financial profiles to 35-44 year old group. However, for many, financial pressures are starting to ease. For those who have a mortgage, mean LTV has fallen to 37% compared to 55%.

There is, however, a different story for some in this age group, with 16% over-indebted and 25% just surviving. The same picture is shown by the fact that 22% own their home outright but 15% have an interest-only mortgage,. In addition, only 35% have given much thought to how they will manage financially when they retire.

55-64 year olds are more aware of retirement, although many now plan to work either full-time or part-time beyond the traditional retirement age of 65.

Interestingly, 31% have more than two adults over 18 living in their household. These could be elderly parents or adult children who have shown no inclination to flee the nest.

53% of this group own their home outright, with 25% having a residential mortgage. Confidence in the UK financial services sector continues to decrease with age and people also become more risk-averse.

65 year olds and older constitute 22% of all UK adults. This proportion is forecast to grow. Most (86%) are retired and living off pensions and savings, 83% have no unsecured debt. They are confident managing their money. 78% own their home and only 1% are in financial difficulty (18% are just surviving). Increasing life expectancy is a boon for some, but others are worried about the cost of care. Additionally, 29% are worried that they may not have enough money to last for their lifetime. Wealth is concentrated, with 24% having savings of £50,000 or more and 39% having savings of less than £20,000 or nothing at all.

The above is just a tiny snapshot of some of the findings. Lenders need to assess the vulnerability of potential borrowers as well as the likelihood of them falling into financial difficulty. It’s clear that, despite the growth of financial information on the internet, most still prefer to deal with humans. This reinforces the continued need for knowledgeable and ethical advisers.

Benson Hersch, CEO of the ASTL

A version of this article appeared in the December 2017 edition of Bridging Introducer