THE UK ADVICE GAP

2020

ARE CONSUMER NEEDS FOR
ADVICE BEING MET?

In partnership with:

Welcome to the 2020 edition of OpenMoney’s UK Advice Gap Report, the second year we have run this study.

The data, combined with our own experience of speaking to customers every day, gives us an insight into the financial lives of people of all ages and levels of wealth. It highlights the real issues presented by the advice gap in the UK and the importance of the finance industry and policy makers working together to increase the availability of regulated financial advice.

There is a danger that Coronavirus will be used by some as an excuse to hide existing problems. This is particularly the case with the state of many household’s finances. As this research shows, much of the population was already in a precarious financial situation in the days before the crisis really escalated. Too many people were not saving for their future, too few were planning their finances in advance and not enough were able to access regulated financial advice. The events of the last few months have only amplified these problems.

At OpenMoney we are determined to change this. We want to make financial advice more accessible to more people, helping them take control of their money, build up savings and start investing in their future.

We believe this mission has never been more important.

The advice gap is growing

Some 59% (2019: 56%) reported having some form of household debt and 44% (2019: 46%) had run out of money before their next pay at least once in the previous year. The need for accessible, affordable - and particularly free - advice has never been greater. This need is reflected in the increasing free advice gap, with some 20.9 million UK adults who would potentially benefit from advice unaware of free advice services or unable to access them, an increase of 1.1 million over the last year.

Our research tells us that when people take specialist money advice the vast majority have a good experience. And yet in the last two years only 12% of our respondents have accessed free money advice and just 10% have taken paid-for advice. We also asked respondents what differences, if any, there are between financial advice and financial guidance. A large number admitted that they simply don’t know, but those who did answer revealed a great deal of confusion about the terms, as well as some distrust.

Spending for the now rather than saving

It is clear from our research that too many people aren’t planning or investing for the future. In some cases they are not even doing so for the shorter term. Coronavirus has highlighted the need for a cash buffer and some of the impact we’re seeing now reflects the lack of that – whether through affordability, awareness or prioritisation.

Only 24% (2019: 24%) of our sample save every time they get paid, 21% (2019: 25%) don’t have a pension and the same number have no cash savings at all. A quarter (24%, 2019: 25%) plan their finances month-to-month and 17% (2019: 19%) don’t plan their finances at all. The need for accessible regulated financial advice to support people in developing a long-term perspective on their finances and planning for that is palpable.

It’s no surprise then that many households find themselves experiencing financial difficulties on an alarmingly regular basis. Just under half (44%, 2019: 46%) of respondents have run out of money before their next pay day, with one third (34%, 2019: 33%) turning to short-term credit (overdraft, credit card, payday loan or buy now/pay later scheme)because they didn’t have enough money for the essentials and 29% (2019: 27%) borrowing from family or friends to fund day-to-day expenses.

Distrust in advice is hindering people’s ability to save

Despite all that, respondent confidence in their ability to manage money and make financial decisions remains high with 62% (2019: 64%) stating that don’t need any help. When we asked our sample to share their perceptions of financial advice one theme was that it was unnecessary: “Someone working on commission trying to sell me something I don’t want or need”, “Someone who wants to charge you a lot of money for something you could research yourself" and various references to Google. Perception and understanding are just as significant issues as awareness and accessibility.

Most financial advisers work very hard to provide trustworthy, suitable, client-centred advice, but many people find it hard to differentiate between regulated advice and generic guidance. Worse still, there is a strong theme of distrust around the impartiality of advice and the value it provides.

Then this over confidence by respondents to source their own advice is belied by the data we have seen around debt and planning and the fact that 39% (2019: 40%) are either struggling with household expenses or have already fallen behind with their bills. This situation can only worsen as the longer-term impact of Coronavirus on people’s income starts to bite.

Taking the advice plunge 

The most frustrating aspect of all is that, despite some choice perceptions of paid-for financial advice and even of free guidance, the outcome when either is taken is largely positive. Those who received free specialist money advice were able to get help quickly (39%, 2019: 35%) and at a convenient time (46%, 2019: 49%) with around a fifth (21%, 2019: 20%) also getting help with related problems. There was a lower take up of paid-for advice but 16% (2019: 6%) also received help with connected issues.

The good news is that we do appear to be talking more about our money issues. However, UK adults are more comfortable turning to the ‘Bank of Mum and Dad’ which ranks as one of the UK’s largest mortgage lenders and now appears to be expanding its services into financial advice. Almost a third of those who speak to their family or friends for guidance have spent over 30 minutes in the last year doing so, and these conversations can cover a wide range of financial topics and products. Our challenge as an industry is to broaden that out to potentially more appropriate or better equipped sources.

Then for those to turn to help online, the three most commonly accessed sources of free advice over the last two years were MoneySavingExpert.com (11%, 2019: 10%), StepChange (11%, 2019: 9%) and CitizensAdvice (8%, 2019: 8%). Over a third of respondents (36%) found the advice through their own research, down from 40% in 2019, while a fifth (21%) followed the recommendation of friends or family, up from 16% last year, and a further 15% (2019: 15%) were referred by another organisation they approached for help.

What can we do to help?

It’s evident that many people in the UK are in aprecarious financial position, often relying on short-term debt or borrowingfrom friends while not being able to save for emergencies or the future. Thenumber of respondents with no outstanding household debt had already fallen from 38% last year to 34% this year and early evidence suggests the significant impact of Coronavirus on household finances will only drive this number further down. We also worry that the impact of Covid-19 will force more people to rely on credit cards, overdrafts and short-term debt for everyday essentials and potentially drive them into financial difficulties. And we are concerned that mortgage payment holidays will simply store up the problem for some people who could struggle with larger monthly repayments or longer terms when the ‘holiday’ ends.

With that in mind, we are calling on the Government to strengthen consumer credit law and align regulation around all forms of unsecured debt. Specifically, to cover fully buy-now-pay-later schemes, workplace lending services and other new forms of credit to ensure that using this form of debt is a considered action taken with full knowledge of the implications. We believe the industry’s ultimate goal must be to close the advice gaps and help everyone, regardless of age, wealth or experience, make the most of their money today and for the long term. A crucial first step is to improve the stability of many people’s day-to-day finances and slow the growth of debt.

Click the download link to download our full finance gap report to see more on how the advice gap as evolved both over the last 12 months and since the original advice gap research conducted by Citizens Advice in 2015, and what this means for you.

*All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,081 adults. Fieldwork was undertaken between 9th and 10th March 2020. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

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Guest Blog: Going Green on a Budget
Rachael Revesz: Financial Journalist & Guest Blogger
September 23, 2020

I’m ashamed to admit that a television programme was the cure to my environmental apathy.

In 2017, ‘Blue Planet’ switched something in my brain, or rather, it opened my eyes. I was suddenly appalled by the amount of single use plastic in supermarkets. I became obsessed with researching locations where I could recycle everything from a packet of crisps to a pair of trainers. I loaded up on jam jars and clink-clunked my way to the (now several) plastic-free shops in my neighbourhood, loading up on loose pasta, sunscreen in a tin and bamboo toothbrushes. 

But as I discovered over the past year, being eco-friendly can involve a lot of time and money, lending a ‘green’ sheen to capitalism. In some ways, we are not being encouraged to buy less, but to buy more, even if it’s to replace something we already have. No wonder the discussions around living in an eco-friendlier way often increasingly revolve around class and privilege! 

But whatever our budget, we can all do more to stop the albatrosses choking on our rice packets and support local businesses. Here are a few of the tips I’ve stacked up.

Laundry love

I’m an Eco Egg convert – it’s a reusable, plastic egg filled with pellets that you stick in the drum of your washing machine. It costs about 14p per wash and uses far less harmful chemicals than traditional detergents and fabric conditioners.

Following in the footsteps of Mrs Hinch can often involve exposing yourself to bleach and other expensive and harmful chemicals. But kitchen staples like cider vinegar often do the job. To unblock your drain for example, pour a cup of boiling water, followed by a scoop of baking soda and a splash of cider vinegar down the sink and watch it fizz and bubble away.

Make your own mask

We’ve all seen the heartbreaking footage of disposable masks littering our streets and oceans. Yet you can rip up and old t-shirt and make your own, or buy an eco version – check out Spice Kitchen’s range of 100% cotton, reusable masks that can be washed. They were even hand sewn in the UK.  

Plastic-free shopping

I don’t want to rehash the ‘M&S cauliflower steak’ debate but really, why are most things wrapped in plastic and overpriced? 

Head to your local market or fruit and veg shop, which often sell products loose. No packaging at all.  

Food wise, I also heartily recommend Abel & Cole, which delivers seasonal, local meals and veg boxes that you can cook at home, and they drive electric vans and use returnable packaging. It’s not cheap – but then you will never buy something that you don’t use. It’s much less wasteful and more eco-friendly than Uber Eats or Deliveroo.  

Switch search engines

One of the most carbon intensive things we do is being constantly on the internet and checking emails. Ecosia is a search engine that plants trees to offset its carbon footprint so you can feel a little less guilt every time you want to check J Lo’s birthday or find the 10 best brunch places in your area.  

Check your wardrobe

This one may be a tad controversial but I’m trying my best. I have been experimenting with clothes rental services (sending the clothes back every month in re-usable packaging) as well as clothes swaps websites, vintage and charity shopping. I no longer want to buy from the high street, but I also can’t afford to blow £350 on a coat. This is a slightly better and cheaper option for a woman who still wants new and shiny things.

Get the train

Diesel trains are still not ideal, but they emit far less carbon than planes or single person car journeys. If you can’t get a young person’s or two together or student railcard, have a look at an app like TrainSplit which splits the fare and can save you up to 40%.

Keep your cup

The thing I buy every day is coffee. You can judge me if you want but it’s my small luxury and it gets me out of the house. However, my trusty Keep Cup has lasted more than three years and saved me literally hundreds (?!) of pounds as coffee shops either give you a stamp or a discount of around 20-40p off when you bring your own.

Buying a reusable water bottle is also a good idea. The most popular ones from Chilly’s are ridiculously expensive at £20. You can buy an equivalent for a fiver at a shop like Wilko.

Get a smart meter

Investigate installing a smart meter and thereafter avoid falling over the vacuum cleaner to get a reading. We all have to do more to change the way we use energy, as well as pay for it. Read more about it and how you can get free installation here.

Recycle your phone

I now use Envirofone when it’s time for a new handset. They also recycle and repair old phones and what you get is as good as new. It’s free postage, and no contracts!

Rachael Revesz is a freelance journalist and host of An Honest Account, a podcast about how money affects our lives. You can follow Rachael on Twitter, here.

App update: To-do list and account linking
Thomas Potter - Senior Marketing Coordinator
September 11, 2020

We first launched the OpenMoney app in April 2019 and we’ve spent the past 18 months listening to user feedback on how we can improve the app and make managing your money a doddle.

We’re excited to announce that we recently released the newest version (v3.2.0) of the OpenMoney app that has some cool new features and improvements to your experience! We’ve introduced a new feature called the ‘To-do list’ that helps you create an accurate and complete financial picture and we’ve streamlined our onboarding and account linking process to give users access to our money management tools quicker. Read more about the new features below.

To-do list

We know that having all your accounts in one place makes it easier to organise your money and see what’s what. Now all of the OpenMoney app features are easy to see in our new to-do list tool! Here’s how it works.

Once you’ve linked a current account and logged-in to the OpenMoney app, the first thing you will see is a ‘To do list’ feature in the Home tab. The to do list introduces some of the useful functionality within the app such as budgeting, categorising transactions and setting up your regular payments whilst also prompting you to add additional accounts such as savings accounts, credit cards and pensions and investments.

By completing the to do list you are creating a complete financial picture of all of your accounts whilst also practicing good money management by setting budgets and organising your spend. Completing the to do list also allows us to get to work on analysing your accounts and seeing where you can be making your money work harder!

Download the OpenMoney app on iOS and Android and try out our new feature!

The OpenMoney To Do List

Linking accounts

In February we announced our partnership with Moneyhub who provide us with an Open Banking functionality to allow you to securely connect your financial accounts. We‘ve further refined the user journey to make it even easier to connect your accounts and we also now can link digital banks such as Monzo and Starling.

Open Banking allows us to safely and securely connect to your bank accounts without you needing to remember your details. So no more faffing with codes and numbers you can’t remember – but still completely safe and secure. The OpenMoney app prompts you to open your banking app and creates a connection between them both, all in the touch of a few buttons.

The streamlined onboarding allows you to connect your account quicker and get access to some of the brilliant in-app features.

Keep your eyes peeled for more feature announcements on the OpenMoney app.

Our top four money management tips for students
Leona Tooley: Social Media & Content Manager
September 10, 2020

Heading off to university is both nerve-wracking and exciting at the same time. For most, it’s the first big step into independence and the ‘big bad world’. There are a lot of stereotypes attached to the life of a student, but with a little bit of planning, it doesn’t need to be a life of packet noodles and microwavable meals. Here are our top tips for managing your money as a student and getting the most out of your university experience with as little difficulty as possible.

Find the right student bank account for you

Student accounts are just like regular bank accounts, but come with incentives or freebies, as well as offering an interest free overdraft that is unique to this kind of account. When looking at the right one for you, it’s useful to look at the offering from each bank. Whilst free gifts are great, they don’t beat a generous 0% interest overdraft, so make sure the right bank for you has a good balance.

Once you’re all set up, it’s so important to remember that this isn’t free money. Using your overdraft is a good way of working on your credit score (you can read more on what affects your score here), but the key thing to remember is that this isn’t free money. Whatever is borrowed will have to be repaid, and the interest free offer is only applicable whilst you’re at university. Three or four years may seem like an eternity, but you would be surprised how quickly it comes round.

Pay attention to your student loan

If you have been granted a student maintenance loan, it will be split into almost equal amounts and deposited into your account in three installments, at the start of every semester (this differs in Scotland, where student loans are paid monthly). The arrival of your first installment can feel like you’ve won the lottery! Just bear in mind it is there to support your living expenses whilst you’re at university; it can really help with rent and bills.

It’s worth making a note of the date that each installment is due to be paid to, how much you will be receiving, and all of the necessary outgoings that you will be paying in between each ‘student loan day’. You can then see how much you have left to play with for the fun stuff. It’s a great habit to get into and one that’ll really pay off throughout your adult life too.

Think about a part-time job

As you will know from the student loan application process, the amount received varies from person to person, depending on personal circumstances. Although the maintenance loan is there to support you, you may find when looking at your budget, that you don’t have quite enough to cover everything you want to do. Don’t panic, this is pretty normal.

Once you’ve settled into university life and have gotten to grips with balancing your lecture schedule and your social life, have a look into whether a part-time job could be beneficial for you. It might not be your go-to solution, but it’s more common than you would think. Restaurants, bars and shops are always looking for staff during term time and they can generally be quite flexible with your schedule. It’s a great way of building up a bit of a cash buffer to cover anything that your student loan doesn’t. 

Look for student offers

Being a student has a whole host of perks to take advantage of. Whether you’re shopping for bits and pieces to make your new bedroom feel like home, a new laptop for those all important lecture notes, or if you want to organise a takeaway night with your flat mates, there are discounts specifically for students everywhere. There are even handy sites such as StudentBeans that group them all together to make it even easier for you.

That's our round up of top money management tips for students! If you're heading to university this year or you're a recent graduate, let us know your top tips over on twitter.

How to boost financial education at home 
Kalpana Fitzpatrick: Personal Finance Expert & Guest Blogger
August 27, 2020

If there’s one thing lockdown has achieved, that’s my children’s elevated interest in money.

Both my husband and I are financial journalists, so in one way another, we are always talking about finances - conversations around investing, saving, budgeting, pensions, debt and so are pretty normal.

Naturally, my boys, age 10 and seven, often catch a glimpse of articles on my laptop or invite themselves onto Zoom calls, and want know about money matters. But with home schooling and both parents working, trying to squeeze in financial education is tough if not impossible. As far as I’m concerned, learning about money is just as important as the school exercises on adverbs, pronouns, conjunctions, or the correct use of prepositions.

 Turning to their favourite games is one way. My eldest son, 10, loves a game of chess, so, we took the opportunity to use the chessboard to give him a lesson in compound interest. Albert Einstein once described compound interest as the eighth wonder of the world, so I consider it one of the most valuable money lessons he will have.

Starting with a grain of rice

Ever heard of the story about a grain of rice and the chessboards? Don’t worry, I’m about to share it with you.

It’s a story how a man of great wisdom became the wealthiest person in the world when challenged to a game a chess by a king.

The sage was asked name a reward, at which the sage asked for a grain of rice; he wanted one grain on the first square, two on the second, four on the next, and so on, doubling the number of grains on each square for all 64 squares.

Not much of a reward you may think, but as we move along the squares, the number of grains add up to an outstanding amount - the king would have to put down 18,000,000,000,000,000,000 grains of rice at square 64. Not such a small reward after all!

And that’s how, kids, compound interest works! By the way, I didn’t go the full way with the grains of rice…the lesson was achieved by the time I got to square eight!

Compound interest

Compound interest works in a similar way, it’s interest on interest. So, now when I ask my son to put some money away, we talk about interest and how his money can achieve extreme growth over time by allowing interest to grow in interest. And when he argues a pound isn’t much, I usually remind of the grain if rice. It’s also an important lesson in delayed gratification.  

He has an investment ISA, and although the stock market hasn’t been quite as rewarding in the last few months, he knows it's money left to grow and hope that when he has access to it at 18, he will make some sensible moves. Ok, I know there’s no guarantee of that, but I’m prepping him.

Money from movies

My younger son, who is seven, isn’t interested in chess, so I haven’t been able to use chess board to teach him about money.

But, he loves movies and has a box of his favourite DVDs in his room. We occasionally open up shop where we can ‘rent’ his DVDs, and parents have to pay to borrow them. The money goes into his savings and as long as he doesn’t spend it, I will double it. It’s just a game and I know he is winning big time here, but I hope he is learning the concept of saving here.

Before lockdown, we sometimes went to the bank to put the money into savings. Most children haven’t stepped foot in bank, but I believe it’s important to show children what a bank is and explain how it works.

Why teach it

You may be asking why I bother teaching my children about money and not just leave it to the teachers? Well, sadly, financially education is scarce in schools, and I want my children to have confidence with money, be able to ask the right questions and make the right moves. I certainly never want them to say ‘I’m bad with money’ or that ‘money confuses me.’

But children also learn from their parents and it’s a lesson that MUST start at home. Research from Cambridge University[1]shows children’s money habits are set by age seven, so parents should not underestimate just how important it is and install good habits as young as possible.

It’s been a tough environment for parents, especially with most children off school, but my advice would be not to overthink it– make money lessons part of their favourite game or hobbies, and be open about it. Just talking about it, anything from coin recognition for younger ones to showing them how you pay bills, is a good start.

 

 

Kalpana is a financial journalist and money expert. She is the personal finance editor of Hearst Magazines, money expert on the BBC Sounds Money 101 podcast and a TV/radio pundit.

Follow Kalpana on twitter @KalpanaFitz

 


[1] Money Advice Service

What can you expect from your financial adviser?
Hannah Cole, Adviser Team Lead
August 20, 2020

Hi, I'm Hannah, an Advice Team Lead here at OpenMoney! Being able to provide you, our customers, with the support you need to make the right financial decisions to reach your goals is so important to us. To do that we combine the technology of our advice platform, with the expert knowledge of our qualified financial advisers to ensure you get the ongoing support you need to achieve your financial goals.

Here's what to expect from your advisers when investing with OpenMoney.

A dedicated adviser

Each and every one of our customers receives a dedicated financial adviser when going through our investment journey. We believe in building and nurturing relationships, so we assign you your own personal adviser right from the get-go. No more speaking to different people (or even a robot!) every time you have a question.

Free appointments

We don't charge an upfront cost for booking an appointment with an adviser as it's part of our ongoing investment management fee of 0.35%, if you decide to invest with us. You can book an appointment at any time too. Whether you're unsure about the recommendation we've given you online, or you want to chat about the latest market movements, you can book an appointment with your dedicated adviser in your online portal.

Re-advice

We contact our customers on a yearly basis to make sure everything is going okay and that your circumstances haven’t changed. If they have changed, our advisers will work to change your investment plan to fit your new situation and help you reach your new goals. This is all part of our ongoing management fee too!

If you are interested in receiving financial advice from OpenMoney, simply click 'Get Started' and take our financial health check. Our support and advice team will be on hand Monday - Friday 9am - 8pam and Saturday 9am – 1:30pm to help.

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