What can advisers learn from the FCA's Financial Lives survey?

Any data that helps shed light on this is incredibly valuable, and the Financial Conduct Authority's latest Financial Lives survey, published in July this year, offers a treasure trove of information on consumer experiences and behaviour.

This is an enormous piece of research, in which the FCA surveyed more than 19,000 people to gain a deep dive view of how adults use financial services in the UK.

The research – mainly carried out in May 2022 – was the third in a series of reports. By comparing results this time to previous years (2017 and 2020) the FCA hopes to build up a picture showing the trends of how consumers’ attitudes and their financial positions are changing over time. 

Finally, to add value and richness to these results, the FCA also carried out 32 qualitative interviews with a range of people.

The results on how people view the financial services industry are a mixed bag.

The FCA sets a lot of store by their research and it urges financial services firms to use the results to better understand the needs and experiences of their customers and target markets. 

The FCA uses the results of the survey to feed into their three-year strategy, as well as inputting into current reviews and helping it monitor the implementation of other reforms, such as the consumer duty. 

This article runs through some of the key areas that were investigated by the FCA. 

The cost of living crisis

In addition to the main piece of research, the FCA carried out a short survey covering the six months to January 2023, focused on the impacts of the rising cost of living on people around the UK. Unfortunately, the results are pretty bleak. 

Nearly nine out of 10 adults cut back on spending when compared to the previous six months. Most people had seen their financial situation worsen, and more than a third were finding it impossible or difficult to cope financially. 

Worryingly, more than half (56 per cent) of UK adults stopped saving or investing, reduced how much they were saving or used their savings to meet daily expenses during the period. 

Although the cost of living crisis is generally going to hit hardest those who are unemployed, from low-income households and renters, it has implications for society as a whole, showing a shift in all our fortunes. Financial advisers’ clients will not be immune from these effects. 

Measuring the progress of consumer duty

The consumer duty is a major piece of regulation that will set a higher standard of consumer protection in financial services.

After committing so much time and resource to its design and implementation, the FCA is obviously keen to make sure it can demonstrate it is having an impact. 

In this regard, the FCA added new questions to the survey in May 2022 to test how firms were already meeting the requirements of the consumer duty.