UK Wealth & Advisory Inequality Grows as the Economy Struggles to Open to the New Covid-19 Realities
As the COVID-19 crisis moves to a new phase of re-opening, renewal and an adaptation to the ‘new normal’ – there are many across the nation who have and continue to suffer the economic impacts wrought by the global health pandemic.
Economic Inequalities Widen as the Economy Slowly Opens
Putting the extraordinary health-toll aside, the crisis has brought into sharp focus the relative economic inequalities that exist within the UK today; with lower-income households borrowing at record levels to meet living expenses, whereas higher-income bracket families are seemingly saving more as a result of the lockdown, inability to travel and access to expert advice.
According to an audit of household finances by the Resolution Foundation, the report states that lower-income households are twice as likely to have increased debts as opposed to their wealthier counterparts. The report also states that workers in areas of the economy that have been shutdown or furloughed, average households held savings of around £1900 in comparison to a buffer of around £4,700 in higher-income households.
In short what we are witnessing is the growth of damaging wealth gaps across the UK, which have been exacerbated by the COVID-19 crisis – whilst some have managed to save and adapt, others have had to rely on expensive high interest credit solutions to meet day to day expenses. The wide-reaching study also found that London and the South East accounted for 38% of all wealth between 2016 to 2018, up from 32% a decade earlier.
Impact on the Young & Lower-Income Households
Findings by the think tank have found that the young are the quadrant most impacted by the COVID-19 crisis with more than one in three earning less than before the outbreak.
Whilst older members of the workforce may have the benefit of property equity or be able to take redundancy or retire, it is feared the legacy of debt for the young will hamper life chances for many years to come.
According to research by the Institute of Fiscal Studies last year, it was found that even then there was a growing concern over the widening nationwide inequalities in pay, health and employment opportunities with a resulting undermining of trust in democracy and political-economic establishment.
Wealth Inequalities Further the Financial Advisory Gap
As mentioned in a previous post which defined the Financial Advisory Gap in the UK, accessing the right advice when in crisis can make all the difference, but as disparities exist within household incomes – as does the level of access to expertise that can help stave off economic difficulties.
In short the costs of accessing sage advice is prohibitive to many in the lower-income brackets and according to Ed Downpatrick, Fintuity’s Strategy Director;
“As the coronavirus pandemic continues to impact the United Kingdom, with millions of workers having been laid-off, placed on furlough, or out of work, it comes as little surprise to see that lower-income households are having to rely on savings and borrowing to stay afloat. This, in turn, has only increased the wealth divide across the country.
“There are a number of money-saving options available for those who are struggling during this time. For example, credit and mortgage payment holidays have been offered to aid families and workers in dealing with the short term backlash of lockdown. Helping lower-income families manage their finances for the long-term, however, requires a much more concerted effort, including planning, strategizing, and understanding exactly where and how money can be saved.
“Fortunately, wealth management services are no longer reserved for the millionaires and high net-worth individuals, and struggling workers, families and individuals should seek the services of a reasonably priced wealth adviser platform, communicating with industry professionals to see what options are available, and to start saving immediately.”
The Independent Financial Adviser (IFA) sector is key to the financial wellbeing of the UK as it imparts essential support and advice to help protect both individual & family finances. According to the FCA, some 6 million people use IFA services each year, however, the industry remains technologically poor, lacks automation and with increasing operational costs & low profit-margins – higher service fees are often passed to the customer.
As income and advice inequalities continue to grow, Fintuity is doing all it can to address this worrying void.