This approach can make a significant difference, not only on an individual level but also in terms of broader macroeconomic stability.
The assertion that people will seek financial advice from their providers if they need it is a false one. In fact, the evidence shows that the people taking one-to-one financial advice are already financially literate.
Increasing the volume and availability of advisers, therefore, will not solve the problem. This calls for new ways of reaching people who need financial education but are not pursuing it.
An excellent example of how advice can be transformative for an individual struggling financially is if we consider mortgages.
Mortgages are a financial product that customers typically take out only once every three to five years. This means that borrowers are not regularly engaged with their product and are not aware of the full scope of options available to them.
However, what places individuals at a higher risk of default is their lack of understanding about the payment management options offered by their lenders.
One such option is forbearance, which many customers are unaware of. Consequently, they struggle to stay afloat and, unfortunately, miss payments when they could have explored available alternatives.
The key factor that pushes someone from financial strain to actual default is their lack of awareness about the array of options that their bank could have offered to temporarily ease their financial burden, especially regarding their largest financial obligation.
If consumer duty has taught our industry anything, it is that the UK is ready for a more person-focused financial services industry, one that truly cares about outcomes and proactively facilitates them.
Finding ways to help people find autonomy over their finances as they struggle with the cost of living is an excellent building block upon which to foster trust with consumers.
If we provide customers with the tools and knowledge to make good financial choices, we improve confidence levels and build lifelong relationships.
In a country as economically advanced as the UK, it makes little sense that such huge swathes of the population are turning to social media platforms instead of regulated experts for advice.
How technology is helping
Having illustrated the need for a cultural shift towards proactive advice, the advent of artificial intelligence provides a unique opportunity for our industry to revolutionise the way financial advice is delivered.
When advisers deal with customers face-to-face, they often receive limited feedback on their delivery of information, whereas AI can receive actionable feedback and respond immediately, presenting information in an altered format.
Advisers can also use AI to better serve their clients as technology affords them the time to provide their customers a constant feedback loop until they confirm that they understand and need no further assistance.
