The Preventative Advice Gap

• Context:
• The study:
• Key findings:
• Points to consider:

Context:

Asking for and receiving appropriate advice about money can help people optimise their incomes and avoid falling into financial difficulties. Advice is now more important than ever, with a UK policy trend towards giving individuals greater responsibility for managing their own money and the increasing financial complexity / instability in people’s lives. As people’s finances do become less stable, advice is more important than ever as this is when they have even greater responsibility for managing their money. One of the reasons people don’t seek or receive money advice is that it is not designed, or delivered, in a way that helps them avoid getting into financial difficulties in the first place. This is the preventative advice gap.

The study:

This 2017 report from Citizens Advice uses national polling data taken from a YouGov survey that was collected in October 2015. Data was collected from 2,041 adults.

Citizens Advice also conducted 13 in-depth stakeholder interviews with money and debt advisers, to uncover examples of innovative practice that may point to how a more preventative advice system can be delivered.

Key findings:

• The report gives three main reasons for people needing help with their money:
  • People’s lives are becoming more complex and their financial situations are more subject to change and unexpected shocks.
    • This is compounded by over a third (37%) of people who never or hardly ever manage to save anything, and 28% of adults saying they ‘live for the day’ when it comes to their finances.
  • There is a trend towards people being given greater responsibility for managing their money. For example, choices over pensions savings and monthly rather than weekly budgets for Universal Credit recipients.
    • This is despite almost three-in-ten (28%) of adults in the UK reporting that they find managing their money challenging.
  • Many consumers still lack the necessary financial capability to make the best financial decision for themselves.
• A lack of money advice aiming to proactively help people means many people do not get the help they need to manage their finances. The report identifies three causes of this shortfall, and three areas where advice can be more preventative:
  1. Advice is not offered at crucial times in people’s lives, with up to 23 million people not being offered advice at key moments in their lives.
     • One way of countering this is to offer advice alongside other services used at key moments in people’s lives. Citizens Advice offices provide advice at over 2,000 locations alongside other services, such as children’s centers, schools and colleges, GP surgeries, hospitals and courts.
  2. Advice is seen as a last resort, with people not seeking advice until they reach a crisis point.
     • Embedding advice services alongside the services people use when they go through unexpected changes allows advice services to target people most likely to get into financial difficulty.
  3. Advice is too narrow and fails to deal with wider issues such as housing, employment, health etc.
     • To be preventative, money advice must be linked to general advice services. If advice does not address the origins of people’s financial issues, dealing with the financial problems they face will only act as a temporary solution.
     • Encouragingly though, the report suggests that of clients seen by Citizens Advice debt advisers who received free money advice, 40% had their non-financial issue dealt with, while a further 28% were referred to an organisation that could help.
     • The report also states how money and debt advice are funded, commissioned and often delivered separately. It suggests money advice needs to be delivered alongside general advice, particularly when people are in financial difficulty.

Recommendations

• The report suggests it is crucial for the advice sector to step in early to prevent people getting into financial difficulties, which would involve helping them maximise and prioritise their finances.
• The Government must place prevention of financial difficulties at the heart of any policy interventions. Money advice needs to target people going through major changes in their lives and help them to sort out any debts and plan for the future.
  • This would also be an opportunity to promote the take up of Government initiatives that encourage saving, to hopefully build up financial resilience for the future.
• The report concludes by stating that a more preventative money advice system would help people to proactively avoid, rather than respond, to financial difficulties.

Points to consider:

Methodological strengths and limitations:

• There are very few methodological details included in this report. However, as the data is from a national YouGov survey, it is assumed that the data is weighted to be representative of the UK.

Relevance:

• Although published in 2016, this report is still relevant to any stakeholders with an interest in financial advice, and in particular to those wishing to design interventions that offer people early solutions to prevent them falling through the ‘advice gap’.

Generalisability/ transferability:

• The results of this research are useful for informing people about the ‘advice gap’ and how this gap can be filled, but readers must be aware of changes in the advice sector since the date of publication (2016).