Covid-19, financial vulnerability and wellbeing: highlights from the Financial Research Summit

Pandemic behaviours could pose an opportunity…

Online Covid-19 diaries run by InSites Consulting for Nationwide found that people’s savings priorities had shifted from prior to the pandemic, when saving focusing on a specific reason – for example, saving for a mortgage or holiday. However, the pandemic had cemented the importance of saving for a ‘rainy day’, according to Anthony Price, associate director at the agency.

“Savings were brought into focus, no matter what situation people were in,” said Price. “A large section of members wanted to create a safeguard for future support. There were a lot of people ‘accidentally saving’ because they were unable to spend. It does propose an opportunity to turn that passive behaviour into an active one.”

Livvy Gill, senior researcher at Nationwide, said the organisation wants to “incentivise savings behaviour” for members off the back of the research.  

During a panel session on emerging trends in financial services, Alexa Nightingale, research director and partner at Opinium, said that while interest rates have fallen, savings accounts are not “dead”. She said: “The investing industry has a long way to go to make investing accessible to everyone – until that happens, saving is a good option or perhaps the best option for many people. The responsibility should lie on the providers.” 

It is essential for financial services providers to strike the right tone in their communications to maintain credibility, added Katherine Hobby, director and partner at Lansons. “How organisations act now, particularly how they communicate, really sets their paths, arguably for the next decade, when you track where we were in the financial crisis. Are providers listening to the sentiments of not only customers, but their employees and the wider sector? You have to stay empathetic, listen and stay close to the mood.”

…However, there’s no one-size-fits-all experience

Research from Blue Marble tracking 25 households during the past six months found that while the most affluent in their sample remained largely financially untouched by the pandemic, the people in the most financially precarious position have struggled more as the crisis has continued. Younger age groups also tended to be more vulnerable to the volatility of the pandemic – for example, losing their jobs.

Tom Clarkson, director at Blue Marble, said: “For the most affected, their response depends on how used they are to navigating precarious financial situations. Some are financially precarious at the best of times so used to adjusting their discretionary spend. For others it’s a totally new situation – for example they’re newly unemployed – and they’re not – used to juggling their finances in the same way.”  

Insight has played an important role in 2020 as organisations grappled to understand the issues facing customers. Ian Goulding, customer insight lead, marketing at NatWest, discussed how the bank’s insight team responded, saying the shift to online qualitative methods has led to a higher “level of intimacy” in customer research, with participants taking part from home and small businesses talking to each other from their respective offices.

“Qual has fundamentally changed in 2020 – I’m really excited about this. It feels like we are seeing people in their homes in contextually important situations – do we snap back to what we did before? Respondents are more willing to let us into their space – will that continue?”  

Vulnerability has different guises

Financial resilience and vulnerability affect people differently. In a session on financial inequality, Flora Vieites, director at Ipsos Mori, said the company’s research found that BAME people have fewer savings accounts than the general population, fewer are contributing to pensions, and while over half of white people in the UK have access to a credit card or overdraft, this is the case for only two-fifths of the BAME population. Vulnerability is also greater for BAME and Asian groups, on average.

Vieites urged the industry to question this. “My question would be why is that? Are propositions not fitting their needs? What is not being catered for with these audience groups?”

The Julie Taylor, research director at Gusto Research, chairing a panel session on supporting vulnerable customers, said the agency’s work has found that 78% of UK adults display one of the FCA’s drivers of vulnerability. “It’s important to distinguish between chronic vulnerability like long-term health conditions, and transient vulnerability, like divorce or redundancy, which are more temporary but can affect customers’ ability to deal with their finances.”

People’s mindsets can offer insight on financial wellbeing

Thomas Mathar, insight manager – Centre for Behavioural Research at Aegon UK, outlined how the company is tracking financial wellbeing through a survey of 10,000 members of the public.

The study, conducted in August 2020, asked questions about mindset as well as money. Mathar explained: “Partly as a result of short-term concerns, solutions to address financial wellbeing are really to address financial resilience, and I think there’s an opportunity to go beyond that.”

One of the findings of the research, which will be published in full during the first quarter of 2021, offered an insight into the role of future planning. The survey asked respondents to share how vague or concrete their mental vision of their future self is. It found that the more concrete a picture of their future self, the more likely someone is to be a top contributor to long-term savings. Younger women are also less likely to have a specific vision of their future selves compared with men.

Mathar said: “When seeking to improve and individual’s financial wellbeing, we tend to concentrate on tools such as budget planners. But financial wellbeing isn’t just about the here and now, it’s about the long term. We shouldn’t just address the financial matters, but should work on tools that help people work on the picture of their future selves.”