A vital time for good financial advice
A vital time for good financial advice
As the cost-of-living crisis intensifies, many people are looking for places to turn to for advice.
With most households aiming to make savings, what suggestions can financial advisers make to help people save?
An Office for National Statistics study into the impact of the increased cost of living found that more than eight in 10 adults (83%) in Great Britain reported an increase in their cost of living in March 2022.
The most common reasons given by people who said their cost of living had increased were an escalation in the price of food shopping (90%), gas or electricity bills (79%), and the price of fuel (71%).
While thinking about what goes into the grocery basket is something many people are doing in response, what other cost saving solutions could financial experts be suggesting to customers?
Check your mortgage
One of the most important saving steps for many people is to review their mortgage. This payment is generally one of the largest monthly outgoings. Ask your customers to check (or check for them) – whether they are on the best deal? Could they save by remortgaging?
It might be boring paperwork but could well pay off.
Along the same lines, encourage customers to look at other fixed monthly outgoings – where can savings be made?
Think long term
Having to budget in the short term (e.g. in the run up to Christmas or for a special event) is common.
But the current cost-of-living crisis means that many people are facing consistent and prolonged financial strain.
One point financial advisers can discuss with their clients is the potential long-term impact on their finances that a sustained period of higher living costs could have. Getting into a different financial mindset might be required – one which takes a much longer-term view. Ask your clients whether putting a savings buffer in place is possible.
Helen Morrissey, Senior Pensions and Retirement Analyst, Hargreaves Lansdown says that ideally, people should try to save three to six months’ worth of essential expenditure in an easy-access account, which they can call on during times such as this.
For many however, the idea of saving is a long way off, as they may be struggling with debt. Debt should be faced head on. But people often don’t know where to begin when it comes to tackling it.
“Consolidating outstanding debts, switching to a lower interest credit card and starting to pay these off is a great place to start,” says Karen Barrett, CEO and Founder of advice platform Unbiased.
One of the things financial advisers can do is talk customers through making a debt management plan (DMP).
Most banks also have options for discussing debt management and solutions. This is a widespread issue, so people shouldn’t be embarrassed discussing it.
As Richard Lane, Director of External Affairs at debt charity StepChange, says:
“When so many people are already struggling to make ends meet, a steep rise in the cost of living means debt becomes inevitable.
“2022 is going to be a tough year for many, and not just because of energy prices.”
Where to make cutbacks
Small savings across the board can add up, from energy saving to grocery bills.
While clients will probably have thought of many ways to do this already, such as buying supermarket own brand groceries, it can be useful to talk through with a financial adviser a list of ideas of ways to make cutbacks.
For example, you could help a client weigh up the cost/benefit of an electric car in the short and long term for different makes and models, factoring in the added bonus of an environmental benefit.
Or depending on whether they have access to outside space, you could encourage them to grow some of their own food.
Insulating your home is another way to save both energy and money. As much as one third of a home's heat is lost through its walls, while another quarter is lost through the roof and loft, according to Uswitch.
This is a time when many people have an increased awareness of where and what they are spending. It is certainly the point at which financial advice is much called for.